Ebadi's win is certainly something of an embarrassment to Iran's powerful religious right, especially those who wield their power through the courts and who have tried but failed to silence the campaigner.
And for the Iranian establishment as a whole, the fresh focus on human rights only adds to already massive international pressure over Iran's suspect nuclear programme, refusal to support the Middle East peace process and alleged support of terror groups.
Elaheh Koulaie, a female MP and outspoken voice in the reform movement behind President Mohammad Khatami, said Ebadi's prize "shows the world community that the democracy process in Iran is going forward."
Another of Iran's 13 women MPs, Sharbanou Amani said: "I hope the people who do not approve of her will now reconsider their position."
But while praising Ebadi's win, reformists were not celebrating the news as some kind of turning point -- even though Ebadi's outspoken views on human rights have helped shape their agenda and have now been blessed with a prestigious rubber stamp.
The movement is facing what many analysts and observers see as a critical juncture -- their bid to reform Iran has led to some changes, but not the promised fundamental shake-up of the nearly 25-year-old clerical regime.
Khatami, elected twice by massive margins on a platform of delivering "Islamic democracy", also appears unable to break the political deadlock and has remained silent on key questions.
Nearly 24 hours after Ebadi won the Nobel prize, Khatami had yet to react -- even though he is a politician who has championed issues such as democracy, dialogue, peace, and women's rights.
The cause, reformists complain, is the overwhelming power wielded by hardliners in the judiciary, state media, security forces and legislative watchdogs that frequently turf out reform initiatives passed by a reformist parliament they see as trying to undermine the foundations of the regime.
A bid by parliament to give greater powers to the president and strip conservative oversight bodies of their right to vet electoral candidates -- seen as a last-ditch reform bid -- appears to have failed.
The mandate of the reformist-controlled Majlis runs out early next year, and parliamentary elections are scheduled for February 20, 2004. Even the president, whose second and final term in office ends in 2005, has admitted that the run-up to the vote is "very sensitive historical juncture".
Amid widepsread frustration with the deadlock between reformers and conservatives, voters showed their disdain in February when municipal elections saw an all-time low turnout for a country where voter participation regularly exceeds three-quarters of the electorate.
With just a tiny percentage of people bothering to cast their ballots, conservatives -- relying on a committed, hardcore support base -- won the day. Reformists and observers see the very same happening in Febraury.
Even the pro-reform Iran News paper recently published a frontpage analysis pronouncing the "demise of reformists (as) inevitable".
"The utter failure of the reformists to break the political deadlock and get some of their much-hyped agenda through will cast a gloomy shadow over the next Majlis elections," the paper said.
"All signs and indications point to the almost inescapable fact that the reformists will receive a devastating and fatal political blow in a little more than four months from now."
So while Ebadi is likely to press on with her campaigning in the courts, she may very soon find herself with fewer allies in positions of power.