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Obama said he was surprised and deeply humbled by the honor, and planned to travel to Oslo to accept the prize.
"I do not feel that I deserve to be in the company of so many transformative figures that have been honored by this prize," he said. "I will accept this award as a call to action, a call for all nations to confront the challenges of the 21st century."
Many observers were shocked by the unexpected choice so early in the Obama presidency, which began less than two weeks before the Feb. 1 nomination deadline and has yet to yield concrete achievements in peacemaking.
Some around the world objected to the choice of Obama, who still oversees wars in Iraq and Afghanistan and has launched deadly counter-terror strikes in Pakistan and Somalia.
Obama said he was working to end the war in Iraq and "to confront a ruthless adversary that directly threatens the American people and our allies" in Afghanistan.
Members of the Norwegian Nobel Committee said their choice could be seen as an early vote of confidence in Obama intended to build global support for his policies. They lauded the change in global mood wrought by Obama's calls for peace and cooperation, and praised his pledges to reduce the world stock of nuclear arms, ease American conflicts with Muslim nations and strengthen the U.S. role in combating climate change.
"Obama has as President created a new climate in international politics," the citation read, in part. "Multilateral diplomacy has regained a central position, with emphasis on the role that the United Nations and other international institutions can play. Dialogue and negotiations are preferred as instruments for resolving even the most difficult international conflicts."
Aagot Valle, a lawmaker for the Socialist Left party who joined the committee this year, said she hoped the selection would be viewed as "support and a commitment for Obama."
"And I hope it will be an inspiration for all those that work with nuclear disarmament and disarmament," she told The Associated Press in a rare interview. Members of the Nobel peace committee usually speak only through its chairman.
The peace prize was created partly to encourage ongoing peace efforts but Obama's efforts are at far earlier stages than past winners'. The Nobel committee acknowledged that they may not bear fruit at all.
"Some people say, and I understand it, isn't it premature? Too early? Well, I'd say then that it could be too late to respond three years from now," Nobel Committee chairman Thorbjoern Jagland said. "It is now that we have the opportunity to respond - all of us."
In Europe and much of the world Obama is lionized for bringing the United States closer to mainstream global thinking on issues like climate change and multilateralism. A 25-nation poll of 27,000 people released in July by the Pew Global Attitudes Project found double-digit boosts to the percentage of people viewing the U.S. favorably in countries around the world. That indicator had plunged across the world under President George W. Bush.
At home, the picture is more complicated. Obama is often criticized as he attempts to carry out his agenda - drawing fire over a host of issues from government spending to health care to the conduct of the war in Afghanistan.
U.S. Republican Party Chairman Michael Steele contended that Obama won the prize as a result of his "star power" rather than meaningful accomplishments.
"The real question Americans are asking is, 'What has President Obama actually accomplished?"' Steele said.
Drawing criticism from some on the left, Obama has been slow to bring troops home from Iraq and the real end of the U.S. military presence there won't come until at least 2012.
In Afghanistan, he is seriously considering ramping up the number of U.S. troops on the ground and asking for help from others, too.
"I don't think Obama deserves this. I don't know who's making all these decisions. The prize should go to someone who has done something for peace and humanity," said Ahmad Shabir, 18-year-old student in Kabul. "Since he is the president, I don't see any change in U.S. strategy in the wars in Iraq and Afghanistan."
Obama has said that battling climate change is a priority. But the U.S. seems likely to head into crucial international negotiations set for Copenhagen in December with Obama-backed legislation still stalled in Congress.
Archbishop Desmond Tutu of South Africa, who won the prize in 1984, said Obama's award shows great things are expected from him in the coming years.
"In a way, it's an award coming near the beginning of the first term of office of a relatively young president that anticipates an even greater contribution towards making our world a safer place for all," he said. "It is an award that speaks to the promise of President Obama's message of hope."
He described the prize as a "wonderful recognition" of Obama's effort to reach out to the Arab world after years of hostility.
But Former Polish President Lech Walesa, who won the prize in 1983, questioned whether Obama deserved it now.
"So soon? Too early. He has no contribution so far. He is still at an early stage. He is only beginning to act," Walesa said.
Unlike the other Nobel Prizes, which are awarded by Swedish institutions, the peace prize is given out by a five-member committee elected by the Norwegian Parliament. Like the Parliament, the committee has a leftist slant, with three members elected by left-of-center parties. Jagland said the decision to honor Obama was unanimous.
The identity of the person who nominated Obama will not be made public unless that person steps forward. The Nobel committee received a record 205 nominations for this year's prize.
The award appeared to be at least partly a slap at Bush from a committee that harshly criticized Obama's predecessor for his largely unilateral military action in the wake of the Sept. 11 terror attacks.
"Those who were in support of Bush in his belief in war solving problems, on rearmament, and that nuclear weapons play an important role ... probably won't be happy," said Valle, the Nobel Committee member.
Obama is the third sitting U.S. president to win the award: President Theodore Roosevelt won in 1906 and President Woodrow Wilson was awarded the prize in 1919.
Wilson received the prize for his role in founding the League of Nations, the hopeful but ultimately failed precursor to the contemporary United Nations.
The Nobel committee chairman said after awarding the 2002 prize to former Democratic President Jimmy Carter, for his mediation in international conflicts, that it should be seen as a "kick in the leg" to the Bush administration's hard line in the buildup to the Iraq war.
Five years later, the committee honored Bush's adversary in the 2000 presidential election, Al Gore, for his campaign to raise awareness about global warming.
In July talks in Moscow, Obama and Russian President Dmitry Medvedev agreed that their negotiators would work out a new limit on delivery vehicles for nuclear warheads of between 500 and 1,100. They also agreed that warhead limits would be reduced from the current range of 1,700-2,200 to as low as 1,500. The United States now has about 2,200 such warheads, compared to about 2,800 for the Russians.
But there has been no word on whether either side has started to act on the reductions.
Former Peace Prize winner Mohamed ElBaradei, director general of the International Atomic Energy Agency in Vienna, said Obama has already provided outstanding leadership in the effort to prevent nuclear proliferation.
"He has shown an unshakable commitment to diplomacy, mutual respect and dialogue as the best means of resolving conflicts," ElBaradei said.
Massimo Teodori, one of Italy's leading experts of U.S. history, said the Nobel decision was a clear rejection of the "unilateral, antagonistic politics" of Obama's predecessor, George Bush.
"The prize is well deserved after the Bush years, which had antagonized the rest of the world," Teodori said. "President Obama's policy of extending his hand has reconciled the United States with the international community."
Obama also has attempted to restart stalled talks between the Israelis and Palestinians, but just a day after Obama hosted the Israeli and Palestinian leaders in New York, Israeli officials boasted that they had fended off U.S. pressure to halt settlement construction. Moderate Palestinians said they felt undermined by Obama's failure to back up his demand for a freeze.
"I look forward to working closely with you in the years ahead to advance peace," Israeli Prime Minister Benjamin Netanyahu said in a message of congratulations to Obama.
In the Gaza Strip, leaders of the radical Hamas movement said they had heard Obama's speeches seeking better relations with the Islamic world but had not been moved.
"We are in need of actions, not sayings," Prime Minister Ismail Haniyeh said. "If there is no fundamental and true change in American policies toward the acknowledgment of the rights of the Palestinian people, I think this prize won't move us forward or backward."
Obama was to meet with his top advisers on the Afghan war on Friday to consider a request by Gen. Stanley McChrystal, the U.S. commander in Afghanistan, to send as many as 40,000 more troops to Afghanistan as the U.S war there enters its ninth year.
Obama ordered 21,000 additional troops to Afghanistan earlier this year and has continued the use of unmanned drones for attacks on militants in Afghanistan and Pakistan, a strategy devised by the Bush administration. The attacks often kill or injure civilians living in the area.
A Taliban spokesman in Afghanistan has condemned President Barack Obama's winning of the Nobel Peace Prize, saying the American president had only escalated the war by sending more troops.
Qari Yousef Ahmadi accused Obama "of having the blood of the Afghan people on his hands."
In his 1895 will, Alfred Nobel stipulated that the peace prize should go "to the person who shall have done the most or the best work for fraternity between the nations and the abolition or reduction of standing armies and the formation and spreading of peace congresses."
Nominators for the prize include former laureates; current and former members of the committee and their staff; members of national governments and legislatures; university professors of law, theology, social sciences, history and philosophy; leaders of peace research and foreign affairs institutes; and members of international courts of law.
Obama will donate to charity the $1.4 million cash award that comes with the prize. White House spokesman Robert Gibbs says it is likely that more than one charity will benefit.
The committee has taken a wide interpretation of Nobel's guidelines, expanding the prize beyond peace mediation to include efforts to combat poverty, disease and climate change.
Until seconds before the award, speculation had focused on a wide variety of candidates besides Obama: Zimbabwe's Prime Minister Morgan Tsvangirai, a Colombian senator, a Chinese dissident and an Afghan woman's rights activist, among others. ---
Associated Press writers Ian MacDougall in Oslo, Rahim Faiez in Kabul, Celean Jacobson in Johannesburg, George Jahn in Vienna, Monika Scislowska in Warsaw, Poland, Matti Huuhtanen in Helsinki and Jennifer Loven in Washington contributed to this report. ---
On the Net: http://www.nobelpeaceprize.org