Ensaf Haidar told the packed assembly that her husband, sentenced to 1,000 lashes and 10 years in prison for insulting Islam, believed "freedom of expression is like the air that we breathe."
"It would have been nice if my husband could have received the prize personally," Haidar said as his award was placed on an empty chair.
Parliament head Martin Schulz called on Saudi King Salman "to grant mercy to Raif Badawi and without further ado release him and allow him to return to his family."
Badawi, 31, was arrested in 2012 and his initial public flogging of 50 lashes in January sparked an international outcry against Saudi Arabia and its human rights record.
He co-founded the Saudi Liberal Network Internet discussion group which promoted free speech and sought an end to the influence of religious leaders on public life in one of the world's most conservative countries.
"An intellectual in an Arab country has always had to beat about the bush to get his message across. In some, their views are considered blasphemy, decadent," she said.
"In the Arab world under the yoke of theocratic regimes they call on citizens to nod and accept everything religious leaders tell them," she said, speaking in Arabic.
The Sakharov human rights prize is worth 50,000 euros (USD 54,000) and awarded every year to honour individuals who combat intolerance, fanaticism and oppression.
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