The outspoken award winner used the glittering occasion to launch an attack on Israel's policies which have caused misery for millions of Palestinians.
And he called on Europe to exert pressure on Ariel Sharon to stop the persecution of Palestinians.
"All Israel's governing politicians have transformed the lives of the Palestinian people into an intolerable hell with their sanctions and expulsions," he said at Monday’s award ceremony.
Germany's Aachen Peace Prize was also won by Palestinian-born activist Nabila Espanioly, but it was Moskovitz who stole the show.
Moskovitz, 75, said the acts of violence by young Palestinians and fanatics could not be justified, but he said they were often a result of hopelessness and indignation.
Originally from Jerusalem, Moskovitz called on Europe to put pressure on Israeli Prime Minister Ariel Sharon.
The 2000 euro ($2190) award was given to the two for providing "hope on the path to conciliation and peace between Jews and Palestinians", according to the Aachen Peace Prize Association chairman, Gerhard Diefenbach.
Espanioly, a native of Nazareth who holds an Israeli passport, was cited for her 25-year fight for the rights of Palestinian women and children living in Israel.
Also honoured for its work was a German group called Religious for Peace, which first came together around 20 years ago to protest at the deployment here of Pershing nuclear missiles but also campaigns against social injustice.
The Aachen Peace Prize was founded in 1988. Last year's winners were German teacher Bernhard Nolz and US congresswoman Barbara Lee.