"The award should also be seen as a tribute to the Colombian people," committee leader Kaci Kullmann Five said. Voters did not say "No" to peace but to the agreement, she said.
The award pointedly excluded FARC guerrilla leader Rodrigo Londono, better known by his nom de guerre Timochenko, who signed the accord with Santos.
Santos has promised to revive the peace plan even though Colombians narrowly rejected it in the referendum on Sunday. Many voters believed it was too lenient on the FARC guerrillas.
Some Nobel watchers had taken Colombia off their lists of favourites after the referendum "No".
"There is a real danger that the peace process will come to a halt and that civil war will flare up again. This makes it even more important that the parties, headed by President Santos and FARC guerrilla leader Rodrigo Londoño, continue to respect the ceasefire," the committee said.
"The fact that a majority of the voters said "No" to the peace accord does not necessarily mean that the peace process is dead," it said.
More than 220,000 people have died on the battlefield or in massacres during the struggle between leftist guerrillas, right-wing paramilitaries and government troops.
Millions have been displaced and many beg on the streets of the capital, while economic development has been stunted in the mostly rural nation.
"It's a message of hope for my country and for peace in Colombia," the country's ambassador to Norway, Alvaro Sandoval Bernal, told Norwegian broadcaster TV2.
"It reiterates that there is hope for the peace process in Colombia."
Asked why the Londono was left out, Five said Santos had been central to the process.
"President, Santos has been taking the very first and historic initiative. There have been other tries, but this time he went all-in as leader of the government with a strong will to reach a result.
"That's why we have put the emphasis on president."
She declined to elaborate on Londono's role. "We never comment on those who do not receive a reward."
Santos is the first Latin American to receive the peace prize since indigenous rights campaigner Rigoberta Menchu of Guatemala won in 1992, and is the second Colombian after writer Gabriel Garcia Marquez, who won the literature prize in 1982.