The Nobel Peace Prize and the other Nobel Prizes were established by the Swedish inventor and businessman Alfred Nobel through his last will.
When the Swedish businessman Alfred Nobel passed away in 1895, he left behind what was then one of the world’s largest private fortunes. In his last will Nobel declared that the whole of his remaining fortune of 31, 5 million Swedish crowns was to be invested in safe securities and should constitute a fund "the interest on which shall be annually distributed in the form of prizes to those who, during the preceding year, shall have conferred the greatest benefit on mankind"
The will specified in which fields the prizes should be awarded – physics, chemistry, medicine or physiology, literature and peace – and which criteria the respective prize committees should apply when choosing their prize recipients. According to the will the Nobel Peace Prize was to be awarded “to the person who shall have done the most or the best work for fraternity between the nations and the abolition or reduction of standing armies and the formation and spreading of peace congresses.”
Norwegian Nobel Committee
Alfred Nobel’s will declared that the Nobel Peace Prize was to be awarded by a committee of five persons selected by the Norwegian Storting (parliament). The Storting accepted the assignment in April 1897, and the Nobel Committee of the Norwegian Storting was set up in August of the same year. Read more about the Norwegian Nobel Committee (as it is now known) here.
In Sweden, however, Nobel's will triggered a lengthy legal battle with parts of the Nobel family. It was not until this conflict had been resolved, and financial matters had been satisfactorily arranged through the establishment of the Nobel Foundation in Sweden in 1900, that the Norwegian Nobel Committee and the other prize-awarding bodies could begin their work.
The first Nobel Prizes were awarded in 1901. The Peace Prize for that year was shared between the Frenchman Frédéric Passy and the Swiss Jean Henry Dunant.