The Nobel Academy described the historical author, whose work has often focused on the Nazi occupation of France, as “a Marcel Proust of our time”.
The award – presented to a living writer – is worth 8 million kronor ($1.1 million).
Previous winners include literary giants such as Rudyard Kipling, Toni Morrison and Ernest Hemingway.
Patrick Modiano, 69, beat bookies’ favorites Japanese writer Haruki Murakami and Kenyan novelist, poet and playwright Ngugi wa Thiong’o. The last French writer to win the prize was Jean-Marie Gustave Le Clezio in 2008.
The academy said the award was “for the art of memory with which he has evoked the most ungraspable human destinies and uncovered the life-world of the occupation”.
“This is someone who has written many books that echo off each other… that are about memory, identity and aspiration,” Peter Englund, the academy’s permanent secretary said.
French PM Manuel Valls, quoted by Reuters news agency, said Patrick Modiano was “undoubtedly one of the greatest writers” of recent years.
“This is well-deserved for a writer who is moreover discreet, as is much of his excellent work.”
Patrick Modiano was born in Boulogne-Billancourt, a suburb of Paris, to a businessman father and an actress mother.
He studied at Lycee Henri-IV in Paris, where his geometry teacher was Raymond Queneau, a writer who was to prove a major influence.
Much of Patrick Modiano’s work looked at the Vichy regime in occupied France during World War 2, particularly the part it played in the deportation of Jews to concentration camps.
Patrick Modiano’s debut novel, La Place de l’Etoile, was published in 1968 but, more than 40 years later, has yet to be translated into English.
His most recent novel is Pour que tu ne te perdes pas dans le quartier (2014).
Patrick Modiano also worked with film director Louis Malle on the screenplay of Lacombe Lucien (1974), a feature film about a teenage boy during the German occupation of France.
His sixth novel, Missing Person (French title: Rue des boutiques obscures), won the French literary accolade the Prix Goncourt in 1978.
Other prizes include Grand prix du roman de l’Academie francaise in 1972 and the 2010 prix mondial Cino Del Duca by the Institut de France for lifetime achievement.
In 2012, Patrick Modiano won the Austrian State Prize for European Literature.
Patrick Modiano, who lives in Paris, rarely give interviews. The Nobel Academy said it had been unable to tell the author the news before the announcement.
A total 111 individuals have been awarded the Nobel Prize in Literature between 1901 and 2014.
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