Toronto-born Carson, 76, draws on themes and stories from ancient Greek and Roman literature for works that often blend elements of poetry, essay and fiction.
Ingrid Carlberg, permanent secretary of the Swedish Academy, said the author was in Iceland "listening to the wind" when the academy reached her to notify her of the win.
"She was very taken by surprise," Carlberg said on Thursday.
Carson's books include Eros the Bittersweet, a look at the pleasure and pain of desire in ancient Greek literature, verse novel Autobiography of Red, Men in the Off Hours, a collection of poetry and prose that won Canada's Griffin Prize for poetry in 2001 and Norma Jeane Baker of Troy, which compares Marilyn Monroe and Helen of Troy.
She also has translated works of classical Greek literature that, the Swedish Academy said, "may be regarded as independent works in their own right".
They include If Not, Winter, based on poem fragments by Sappho, Sophocles' tragic plays Electra and Antigone and Euripides' Bakkhai.
"Almost all her literary production has centred upon the intersection between the philologist's obsession with words and the poet's desire for new meaning," said Anders Olsson, chair of the literature committee.
Olsson said Carson's juxtaposition of influences ranging from the ancient Greeks to John Keats, Virginia Woolf and Emily Bronte "leads to playful and ironic works that move not only between classical and modern poetry but also between different genres and art forms".
Carson has taught classics at several North American universities and has lived in Iceland, where she and her husband, Robert Currie, were granted citizenship in 2022.
She also has drawn on her own life for works such as Nox, which was published in 2010 and dealt with the decades-long absence and then death of her brother Michael.
Olsson called it "a creation as sculptural as it is literary, an epitaph in the form of a box containing an accordion-fold-out of pictures, letters and other written texts dedicated to her dead brother".
It also includes Carson's translation of an elegy by the Roman poet Catullus for his own brother.
Among her most recent work is, Wrong Norma, a 2024 a wide-ranging collection of pieces from publications including The Paris Review and The New Yorker, accompanied by Carson's hand-drawn illustrations.
Also that year, Carson wrote in the London Review of Books about being diagnosed with Parkinson's disease.
She said "a symptom particularly mortifying to me was that my handwriting disintegrated. Hard to describe or explain the shame of bad handwriting."
The prize was announced by the Swedish Academy in Stockholm.
Three science awards were announced earlier this week.
The Nobel for medicine went to three scientists whose work led to a tool that uses light to help unravel how the brain works.
The physics award recognised a scientist's efforts to demystify a rare group of neutrinos.
The chemistry prize recognised two scientists for untangling mysterious mirror images in molecules, a discovery that has been used to develop countless drugs.
This week ends with Friday's peace prize.
The Nobel Memorial Prize in Economic Sciences will be announced on Monday.
The prize money is 12 million Swedish kronor (about $A1.7 million) per prize.
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