She was the first Muslim woman to be named a peace laureate and the first Iranian ever to win a Nobel Prize.
In Tehran -- where the reformist government behind embattled President Mohammad Khatami treads a delicate line between a conservative-controlled judiciary and powerful hardline mullahs -- the government spokesman initially said the leadership was "happy" over the choice of lawyer and human rights activist Ebadi, 56, before retracting his comments amid wider official silence.
Vice President Ali Abtahi, a more outspoken member of the government, told AFP "the fact that a lawyer has won this prize gives us hope that the judicial system will change its methods."
But government spokesman Abdollah Ramezanzadeh later said "We hope that Mrs. Ebadi's points of view will be taken into consideration both inside and outside the borders of Iran."
The awarding of the prize to a Muslim woman is "a global recognition that Islam supports human rights," said Mohamed Fayek, secretary general of the Cairo-based Arab Organization for Human Rights.
"It is very, very encouraging that the prize be given to a woman who is Iranian, and who is working for an extremely important cause," said Asmaa Bakri, an Egyptian filmmaker and documentary film producer involved in women's rights movements.
In Jordan, independent Islamist deputy Adab Saoud said giving the prize to a Muslim woman "means that Islam is the religion of peace" and a cause for "pride" that comes at a time when "Muslims striving for their rights are accused of being so-called terrorists".
Bangladesh, the world's third largest Muslim country, reacted cautiously, with an aide to Prime Minister Khaleda Zia saying any congratulations would be offered privately.
"We have to take into account how other Muslim countries, including Iran, react to the award," he said, declining to be named.
Malaysian Minister for Women and Family Development Shahrizat Abdul Jalil said: "We are very proud of her achievement. It is long overdue that a woman and a Muslim at that is given this honour."
In one of her first comments after being named laureate, Ebadi called for the quick release of "many people who fight for liberty and democracy" now imprisoned in Iran, in a remark seen as unlikely to ease the wrath she has already earned from the Islamic republic's religious hardliners.
Pope John Paul II, 83, and former Czech president Vaclav Havel, 67, both in frail health, had been tipped the first and second favourites to win the prize.
Havel, a key player in both the 1968 Prague Spring and the 1989 Velvet Revolution that overthrew the Czechoslovakian communist regime, quickly offered warm praise for Ebadi.
"From what he knows of her, he believes she certainly merits it and he warmly congratulates her," his secretary Jakub Hladik said.
Similarly the Rome-based Roman Catholic Sant' Egidio community, a lay group whose work for peace and human rights also made it a top contender for the Peace Prize, conceded it was a "surprise, but a great opportunity for democracy and human rights, and for women's rights in the Muslim world."
A telephone poll of Italians found 77 percent thought the ailing pontiff should have won the prize because of his opposition to the war in Iraq.
In Rome a Vatican source said Pope John Paul II would himself send a message of congratulations to Ebadi.
But the pope's countryman, former Polish president and Nobel peace laureate Lech Walesa, was not so acquiescent, calling the choice a "big mistake" in a surprisingly frank attack.
"For me it is a big mistake, a bad mistake, an unfortunate mistake," a visibly annoyed Walesa told television in the heavily Catholic Poland.
"I have nothing against this woman, but if there is someone alive in the world who deserves this distinction it is certainly the Holy Father", he said from Gdansk, saying he would seek to investigate the Nobel committee's choice.
Elsewhere, praise poured in for both the laureate and the Nobel committee in choosing Ebadi.
French President Jacques Chirac, on visit in Tangiers, Morocco, hailed an "exceptional choice", while German Chancellor Gerhard Schroeder saluted her "commitment to tolerant coexistence and understanding between cultures".
European Union foreign affairs envoy Javier Solana said now "Ms. Ebadi is an inspiration for her region more than ever and for the rest of the world," while Prime Minister Kjell Magne Bondevik of Norway, where the prize was announced, said the choice offered "support for dialogue and better relations between the Western and Islamic worlds."
The United States, which has labeled Iran one of the countries of the "axis of evil," said it hoped the honor bestowed on Ebadi would translate into greater freedoms for the Iranian people.
"We fully support the aspirations of the Iranian people to live in freedom and hope the call for democracy will be heard and transform Iran into a force for stability in the region," State Department spokesman Richard Boucher told reporters.
Amnesty International meanwhile said the choice of Ebadi was particularly timely now, to "bring renewed hope for those engaged in the daily fight to uphold human rights."
The UN High Commission on Human Rights hailed the award as an inspiration and encouragement to rights campaigners worldwide.