The Norwegian-based Nobel committee said he had made extraordinary efforts to strengthen international diplomacy and cooperation.
The committee chairman, Thorbjoern Jagland, said they had attached special importance to Mr Obama's vision of a world without nuclear weapons.
There has been mixed reactions over the Nobel committee decision to confer the prestigious award to Obama. Many observers feel that Obama has 'not done anything worth mentioning' to deserve the world's most respected award.
The head of the International Atomic Energy Authority, Mohamed ElBaradei, told World Update's Dan Damon why he supports the decision.
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