About 20 government leaders joined the ceremonies, including German Chancellor Angela Merkel, French President Francois Hollande and British Deputy Prime Minister Nick Clegg.
Critics say the award is inappropriate, given the deep divisions among member states exposed by the debt crisis in the eurozone.
But Norwegian Nobel Committee chairman Thorbjoern Jagland told the audience at Monday's ceremony that the 27-nation bloc deserved the prize for helping "a continent of war to becoming a continent of peace. In this process, the European Union has figured most prominently."
He spoke of European solidarity after the fall of the Berlin Wall and praised Helmut Khol, who was chancellor of West Germany when "East Germany was included practically overnight in a united Germany [in 1989]."
"[The union] has served us all. Thank you very much," Jagland said.
He said the division between East and West in Europe "was broken down more quickly than anyone could have anticipated," adding that democracy was strengthened in countries where it was previously restricted.
"Europe must keep its promise of peace. I believe this is our union's ultimate promise," said Herman Van Rompuy, president of the European Council, who collected a Nobel diploma and medal along with Jagland and EU Commission president Jose Manuel Barroso.
Memories of the two world wars are fading, "but just two decades ago, horrendous massacres took place in the Balkans," Van Rompuy said, adding the EU is now dealing with its "worst economic crisis in two generations, putting the political bonds of our union to the test."
The money that goes along with the Nobel Peace Prize, €930,000 ($1.19 million Cdn), will be given to projects that help children struggling in war zones.