The 57-year-old writer, who is perhaps best known for his early novel Red Sorghum, was compared by the Nobel committee to William Faulkner and Gabriel Garcia Marquez and praised for his "hallucinatory realism".
"In his writing, Mo Yan draws on his youthful experiences and on settings in the province of his birth. This is apparent in his novel Hong gaoliang jiazu (1987, in English Red Sorghum 1993)," said the academy in a statement of Mo's biography.
Last year's literature prize went to Swedish poet Tomas Transtromer.
Alfred Nobel, a Swedish industrialist who invented dynamite, established the Nobel Prizes in his will in 1895. The first awards were handed out six years later.
The awarding ceremony will be held on Dec. 10.
The winner will win a medal, a personal diploma and a cash award of 8 million Swedish Kronor (about 1 million U.S. dollars).
Last Updated (Thursday, 11 October 2012 16:25)