It comes with about the equivalent of $2 million and a statement Wednesday said the prize honours a living person who has made exceptional contributions to affirming life's spiritual dimension, whether through insight, discovery or practical works.
Vanier, 86, founded L'Arche in France in 1964. It's described as a groundbreaking international network where people with and without intellectual disabilities work together as peers.
L'Arche got its start when Vanier invited two intellectually disabled men to come and live with him as friends in a small house.
He named the house L'Arche, which is French for ''ark and ''arch,'' to symbolize Noah's Ark and an arch or bridge connecting heaven and Earth.
The first Canadian community, L'Arche Daybreak, was founded in Richmond Hill, Ont., and 29 communities are spread across Canada from Comox Valley, B.C., to Cape Breton, N.S.
Worldwide, there are 147 residential communities in 35 countries on five continents.
In remarks prepared for the announcement in London, England, the son of ex-governor general Georges P. Vanier made a plea for global peace.
"Before being Christians or Jews or Muslims, before being Americans or Russians or Africans, before being generals or priests, rabbis or imams, before having visible or invisible disabilities, we are all human beings with hearts capable of loving," he said.
Vanier still lives in the original L'Arche community north of Paris and has promoted social justice and unity among Christians and other faiths for more than 50 years.
He will be officially awarded the prize on May 18 at the Church of St. Martin-in-the-Fields, London.
Vanier was born in Geneva, Switzerland, the fourth of five children.
He received a broad education in English and French, living in England, France and Canada.
Another Canadian, Charles Taylor, a Quebec philosopher, was awarded the Templeton Prize in 2007.