"I receive this honor with deep gratitude and great humility," Obama said in an elaborate ceremony enshrining him as a Nobel laureate here.
"It is an award that speaks to our highest aspirations -- that for all the cruelty and hardship of our world, we are not mere prisoners of fate.
"Our actions matter, and can bend history in the direction of justice," Obama said at the Oslo City Hall.
Obama admitted there had been criticism of his award, and accepted he did not belong in the same company as previous laureates like Martin Luther King and Nelson Mandela.
He also took on the irony that he was accepting a peace prize just after deciding to escalate the war in Afghanistan with 30,000 more US troops.
"The instruments of war do have a role to play in preserving the peace," Obama said.
"And yet this truth must coexist with another -- that no matter how justified, war promises human tragedy.
"I come here with an acute sense of the cost of armed conflict -- filled with difficult questions about the relationship between war and peace, and our effort to replace one with the other."
Obama also argued that when force was necessary, the United States "must remain a standard bearer in the conduct of war."
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