At the age of just 17, Malala is the youngest ever recipient of the prize.
The teenager was shot in the head by Taliban gunmen in October 2012 for campaigning for girls' education. She now lives in Birmingham in the UK.
Malala said she was "honoured" to receive the award, saying it made her feel "more powerful and courageous".
She revealed she found out the news after being called out of her chemistry class at her school in Birmingham.
"I'm really happy to be sharing this award with a person from India," she said at a news conference, before joking that she couldn't pronounce Mr Satyarthi's surname.
The Nobel committee praised the pair's "struggle against the suppression of children and young people".