Under the Nobel Foundation's rules, nomination shortlists are not allowed to be published for 50 years.
"Prime Minister Ahmed's leadership has set a wonderful example for others in and beyond Africa looking to overcome resistance from the past and put people first".
The Nobel committee said in a statement on its website the award was given to Abiy "for his efforts to achieve peace and global cooperation, and in particular for his decisive initiative to resolve the border conflict with neighbouring Eritrea".
Since coming to power in April 2018, after years of civil unrest in the nation, 43-year-old Abiy Ahmed has started mending relations with Eritrea following decades of conflict between the countries. On July 9, 2018, Abiy flew to Eritrea's capital and embraced the country's president, Isaias Afwerki, to usher in a new era of peace and friendship.
The committee says the breakthrough was Abiy's willingness to accept an arbitration ruling by an global boundary commission in 2002.
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"The Norwegian Nobel Committee hopes the peace agreement will help to bring about positive change for the entire populations of Ethiopia and Eritrea".
The laureates receive them at elegant ceremonies on December 10 - the anniversary of Nobel's death in 1896 - in Stockholm and Oslo.
Earlier this week, the Nobel prizes in the fields of medicine, physics, chemistry and literature were awarded.
All the Nobel winners will be presented with their prizes on Dec 10, on the anniversary of Nobel's death.
The Nobel Peace Prize is awarded annually to "the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses", as described in Nobel's will.
With the exception of the prize for economics, which is to be awarded next week, all the Nobel prizes were established by the Swedish industrialist Alfred Nobel (1833-96), the inventor of dynamite.