Muhammad Yunus won the biennial prize of $200,000, which honours peace efforts by politicians, academics, activists and international organisations.
"His tireless endeavour to root out poverty and create a new model of giving credit to the poor will bear fruit in terms of greater peace in the world," the Seoul Prize Cultural Foundation said.
It said Yunus, dubbed Banker to the Poor, began fighting poverty during a 1974 famine in Bangladesh. He set up a small bank, Grameen Bank, to give locals access to credit.
Yunus is seen as one of the main developers of the concept of "microcredit", which gives entrepreneurs who are too poor to qualify for traditional bank loans very small sums to start up their own enterprises.
The success of Grameen and Yunus's new banking concept has been emulated in 23 countries, the foundation said.
Reacting to the news, Yunus said: "I am happy and proud to receive the award. Not only does it recognise the Grameen Bank initiative, but it also puts the poor people of Bangladesh and their struggle to fight poverty on the global map.
"The Grameen Bank has now 6.5 million borrowers. Some 96%of them are women.
"Our aim is now to create a whole new generation of empowered men and women out of our 6.5 million borrowers"
"Our bank is now giving scholarships to 28,000 poor students annually and some 12,000 students have completed higher studies with our education loans.
"Our aim is now to create a whole new generation of empowered men and women out of our 6.5 million borrowers."
The Seoul Peace Prize, established in 1990, commemorates the 1988 Seoul Olympics, which drew as many as 160 countries and were seen as breaking the ideological wall between East and West.
Yunus is the eighth winner of the prize, whose other recipients Kofi Annan, the UN secretary-general; Vaclav Havel, the former Czech president; and international relief organisations such as Doctors Without Borders and Oxfam.
The awards ceremony will be held in Seoul on October 19.