Prime Minister Nawaz Sharif called her the "pride of Pakistan" and a "national asset".
He added that Malala, who was shot at by the Taliban last year for promoting girls' education, was a "role model for our youth".
Pakistan Tehrik-e-Insaf chief Imran Khan, whose party rules Khyber-Pakhtunkhwa province, was disappointed to hear that Malala missed getting the Nobel Prize.
Khan said that even her nomination was an honour for all Pakistanis and "we are proud of this daughter of Pakistan who had to suffer trauma at such a young age, almost losing her life, simply because she stood for girls' right to education".
Khan said, "Her many international accolades are a recognition not only of her brave struggle but of the struggle of girls and women all over the world against tyranny and oppression that denies them the basic right to education."
The daughter of former Prime Minister Benazir Bhutto and former President Asif Ali Zardari, Bakhtawar Bhutto Zardari tweeted in support of Malala.
Bakhtawar tweeted: "Forget Nobel, I want #Malala as my future PM."
Her brother, Bilawal Bhutto Zardari, tweeted: "Wazir-e-azam Malala Yousifzai."
Politicians and celebrities have tweeted their support for Malala, emphasising that even if she did not get the award, she won the hearts of millions.
Former Pakistani envoy to the US Husain Haqqani tweeted: "For a 16-yr-old to be in serious contention for a Nobel Prize is in itself a big deal. #Malala #Pakistan."
Murtaza Solangi, the former chief of Radio Pakistan said, "Somebody won an award, #Malala won the world!"
Prior to the announcement, Pakistani analyst Raza Rumi had tweeted, "A Nobel Peace Prize for Malala will also be a slap on the face of messiahs and zealots who distort truth and mislead young minds."
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