The award was unexpected after voters rejected the accord Santos signed last month with FARC leader Rodrigo Londono, alias Timoleon "Timochenko" Jimenez, with some observers expressing surprise the rebel chief did not jointly receive the prize.
But the FARC chief congratulated his former enemy and said the only prize the Marxist guerrillas wanted was "peace with social justice for Colombia.. Peace in the streets."
The Norwegian Nobel committee said the award recognised Santos' "resolute efforts" to bring Latin America's longest war to end and hailed his decision to put the peace deal to the people despite knowing it was controversial.
"By awarding this year's Peace Prize to President Juan Manuel Santos, the Norwegian Nobel Committee wishes to encourage all those who are striving to achieve peace, reconciliation and justice in Colombia," she said.
The deal, signed on September 26 after nearly four years of talks, was supposed to be ratified following an October 2 referendum but voters shot it down, leaving Colombia teetering between war and peace.
The result caught Nobel watchers off guard, with most experts predicting the referendum would scupper Colombia's chances.
"We hope that it will encourage all good initiatives and all the parties who could make a difference in the peace process and give Colombia - finally - a peace after decades of war," Kullmann Five said.
Santos said he was honoured by the award, which he dedicated to "all Colombians, especially the millions of victims of this conflict that we have suffered for more than 50 years."
In remarks to the Nobel Foundation, he also said an end to the conflict was "very, very close" and that the award was "a great stimulus" in the quest for peace.
More than 260,000 people have been killed and 45,000 gone missing in the Colombian conflict which has involved leftist guerrilla groups, rightwing paramilitaries and drug gangs.
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