Machado, who has lived in hiding for the past year, was honoured "for her tireless work promoting democratic rights for the people of Venezuela and for her struggle to achieve a just and peaceful transition from dictatorship to democracy," said Jorgen Watne Frydnes, the chair of the Norwegian Nobel Committee in Oslo.
"I am in shock," the opposition leader could be heard saying in a video sent to AFP by her press team.
Venezuela has evolved from a relatively democratic and prosperous country to a "brutal authoritarian state that is now suffering a humanitarian and economic crisis," Frydnes said.
"The violent machinery of the state is directed against the country's own citizens. Nearly eight million people have left the country," he said.
The opposition has been systematically suppressed by means of "election rigging, legal prosecution and imprisonment."
In this context, Machado has been a "key, unifying figure in a political opposition that was once deeply divided."
The committee hailed her as "one of the most extraordinary examples of civilian courage in Latin America in recent times".
"Despite serious threats against her life, she has remained in the country, a choice that has inspired millions."
Ahead of Venezuela's election in 2024, Machado was the opposition's presidential candidate, but the regime blocked her candidacy.
She then backed reluctant, little-known ex-diplomat Edmundo Gonzalez Urrutia as her stand-in.
Machado's Nobel win was a surprise, her name not among those mentioned as possible laureates in the run-up to Friday's announcement.
- Trump's hopes for prize -
US President Donald Trump had made no secret of his desire to win this year's prize.
Since returning to the White House for his second term in January, the US leader has repeatedly insisted that he "deserves" the Nobel for his role in resolving numerous conflicts -- a claim observers say is broadly exaggerated.
But Nobel Prize experts in Oslo had insisted in the run-up to Friday's announcement that Trump had no chance, noting that his "America First" policies run counter to the ideals of the Peace Prize as laid out in Alfred Nobel's 1895 will creating the award.
Frydnes insisted the Norwegian Nobel Committee is not swayed by lobbying campaigns to get the prize.
"In the long history of the Nobel Peace Prize, I think this committee has seen every type of campaign, media attention," he said.
"We receive thousands and thousands of letters every year of people wanting to say, what for them, leads to peace."
"We base our decision only on the work and the will of Alfred Nobel," he added.
Last year, the prestigious prize went to the Japanese anti-nuclear group Nihon Hidankyo, a grassroots movement of atomic bomb survivors from Hiroshima and Nagasaki.
The prize comes with a gold medal, a diploma and a prize sum of $1.2 million.
It will be presented at a formal ceremony in Oslo on December 10, the anniversary of the 1896 death of the prizes' creator, Swedish inventor and philanthropist Alfred Nobel.
The Peace Prize is the only Nobel awarded in Oslo, with the other disciplines announced in Stockholm.
On Thursday, the Nobel Prize in Literature was awarded to Laszlo Krasznahorkai, considered by many as Hungary's most important living author, whose works explore themes of postmodern dystopia and melancholy.
The 2025 Nobel season winds up Monday with the economics prize.
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