The balladeer, artist and actor is the first American to win since novelist Toni Morrison in 1993.
His songs include Blowin' in the Wind and The Times They are A-Changin'.
Sara Danius, permanent secretary of the Swedish Academy, said Dylan had been chosen because he was "a great poet in the English speaking tradition".
The singer is due to perform later this week at the Cosmopolitan hotel in Las Vegas.
Now you have to remember that Dylan didn't get the prize for his music folks, it was for the words to his songs!