The prize was given this year to the European Union by the Nobel committee for its contribution "over more than six decades to promoting peace, reconciliation, democracy and human rights in Europe".
At a ceremony in Oslo's City Hall, the award was collected by three of the EU's top officials, President of the European Council, Herman van Rompuy, President of the European Commission Jose Manuel Barroso, and President of the European Parliament Martin Schulz.
The event was attended by Norway's royal family, King Harald, Queen Sonja, crown prince Haakon and Princess Mette Marit, and also German Chancellor Angela Merkel and French President Francois Hollande.
In his presentation speech, Nobel Committee chairman Thørbjorn Jagland, paid lavish tribute to the close relationship between France and Germany 70 years after the end of World War II.
However, he also said the EU needed to do more to quell unrest in Europe caused by the recession, describing how "country after country is undergoing serious social unrest because misplaced policies, corruption and tax evasion have led to money being poured into gaping black holes," he said.
The has been some controversy over the awarding of the Nobel prize to the EU, with a torchlight protest march taking place in Oslo on Sunday night, and a boycott of the event by some leaders. But in his acceptance speech, Mr Van Rompuy said that "the test Europe is currently facing is real", but added, "We will answer with our deeds, confident we will succeed".
Likewise, Mr Barroso defended the EU's currency which has taken a battering of late. "One of the most visible symbols of our unity is in everyone's hands. It is the euro, the currency of our European Union. We will stand by it," he insisted.
The €930,000 prize money will be donated to children in conflict zones, and the EU is adding an extra €1m to the fund.
The presentation of today's award required all the diplomacy the EU could muster - it took weeks of behind-the-scenes discussions in Brussels to agree which of the EU presidents should perform what function at the Oslo ceremony.
In the end it was agreed that only two of the three would speak - Mr Barroso and Mr Van Rompuy.
The third, Mr Schulz, who made clear during negotiations that he represented the only democratically-elected EU institution, received the peace medal on behalf of all three.
An early additional plan was for EU citizens to be represented by 27 Second World War veterans, plus one young child from each of the 27 EU member states.
In the end it was decided to send just four children - selected via a competition - to represent the EU's post-war generations
Mr Van Rompuy told the Nobel ceremony audience: "At a time of uncertainty, this day reminds people across Europe and the world of the Union's fundamental purpose: to further the fraternity between European nations, now and in the future."
"This is where the European Union's "secret weapon" comes into play: an unrivalled way of binding our interests so tightly that war becomes materially impossible."
He said the EU had perfected the art of compromise and "boring" politics was a small price to pay for peace.
To laughter, he highlighted the achievement of getting landlocked European countries to engage in passionate debate about fishing quotas, and Scandinavian nations to get involved in talks on southern nations' olive oil subsidies.
Mr Barroso declared: "Our Union is more than an association of states. It is a new legal order, which is not based on the balance of power between nations but on the free consent of states to share sovereignty.
"The uniqueness of the European project is to have combined the legitimacy of democratic states with the legitimacy of supranational institutions: the European Commission, the European Court of Justice.
"My message today is: you can count on our efforts to fight for lasting peace, freedom and justice in Europe and in the world."
But as the ceremony went on, so did the sniping.
Eloise Todd, Brussels director of ONE, which campaigns against poverty, said: "The EU will be awarded this prestigious honour less than a month after its leaders met in Brussels and proposed slashing development aid by more than any other part of the budget.
"European leaders should honour the legacy of the Nobel prize by reversing these devastating cuts."
And Nicolas Beger, director of Amnesty International's European Institutions Office warned: "EU leaders mustn't bask in the glow of the prize.
"Xenophobia and intolerance are on the rise throughout Europe, and growing numbers of political leaders are promoting anti-Muslim, anti-Roma, anti-migrant, and anti-LGBTI messages and enjoying increasing popularity.
"Europeans are in danger of forgetting some hard-learnt lessons from their past about the importance of not relinquishing human rights and the rule of law which protect individuals from persecution."