The Nobel committee said the EU won the peace prize "for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe."
But the award comes as the EU is mired in the biggest financial crisis of the organization's 54-year history.
"The EU is currently undergoing grave economic difficulties and considerable social unrest," said the announcement from the Nobel committee in Oslo, Norway.
"The Norwegian Nobel Committee wishes to focus on what it sees as the EU's most important result: the successful struggle for peace and reconciliation and for democracy and human rights."
The prize committee highlighted the history of Germany and France, noting that the two countries fought three wars over a 70-year-period, but "today, war between Germany and France is unthinkable."
"This shows how, through well-aimed efforts and by building up mutual confidence, historical enemies can become close partners," the announcement said.
The committee also pointed out that in the 1980s, Greece, Spain and Portugal joined the EU under condition that they introduce democracy.
"The fall of the Berlin Wall made EU membership possible for several Central and Eastern European countries, thereby opening a new era in European history," the announcement said.
"The division between East and West has to a large extent been brought to an end; democracy has been strengthened; many ethnically-based national conflicts have been settled."
The 2011 Nobel Peace Prize was shared by Ellen Johnson Sirleaf, Leymah Gbowee and Tawakkol Karman "for their non-violent struggle for the safety of women and for women’s rights to full participation in peace-building work." <