by Paul Owen, Matthew Weaver 

Malala Yousafzai, the Pakistani teenage education campaigner shot on school bus in 2012 by a Taliban gunman, has won the 2014 Nobel peace prize.

Malala won along with Kailash Satyarthi, an Indian children’s rights activist.

The two were named winner of the £690,000 (8m kronor or $1.11m) prize by the chairman of the Nobel committee - Norway’s former prime minister Thorbjoern Jagland - on Friday morning.

Speaking after finishing the school day at Edgbaston High School for Girls, in Birmingham, Malala said: “My message to children all around the world is that they should stand up for their rights.”

She added: “I felt more powerful and more courageous because this award is not just a piece of metal or a medal you wear or an award you keep in your room.

“This is encouragement for me to go forward.”

Malala, now 17, was shot in the head by a Taliban gunman two years ago in Pakistan after coming to prominence for her campaigning for education for girls.

She won for what the Nobel committee called her “heroic struggle” for girls’ right to an education. She is the youngest ever winner of the prize.

After being shot she was airlifted to Queen Elizabeth hospital in Birmingham, where she was treated for life-threatening injuries.

She has since continued to campaign for girls’ education, speaking before the UN, meeting Barack Obama, being named one of Time magazine’s 100 most influential people and last year publishing the memoir I am Malala.

Last month a gang of 10 Taliban fighters who tried to kill her were arrested, the Pakistan army claimed.

In a statement, the Nobel committee said: “Despite her youth, Malala Yousafzai has already fought for several years for the right of girls to education, and has shown by example that children and young people, too, can contribute to improving their own situations.

“This she has done under the most dangerous circumstances. Through her heroic struggle she has become a leading spokesperson for girls’ rights to education.”

Malala explained how she completed the rest of her school day after learning she had won the prize.

“When I found I had won the Nobel peace prize I decided I would not leave my school, rather I would finish my school time,” she said.

“I went to the physics lessons, I learned. I went to the English lesson. I considered it like a normal day.

“I was really happy with the response of my teachers and my fellow students. They were all saying they were proud.”

Satyarthi, the Nobel committee said, had maintained the tradition of Mahatma Gandhi and headed various forms of peaceful protests.

“Showing great personal courage, Kailash Satyarthi, maintaining Gandhi’s tradition, has headed various forms of protests and demonstrations, all peaceful, focusing on the grave exploitation of children for financial gain,” the committee said. “He has also contributed to the development of important international conventions on children’s rights.”

The Nobel committee said it “regards it as an important point for a Hindu and a Muslim, an Indian and a Pakistani, to join in a common struggle for education and against extremism”.

Satyarthi, 60, dedicated his prize to children in slavery, telling CNN-IBN: “It’s an honour to all those children who are still suffering in slavery, bonded labour and trafficking.”

He founded Bachpan Bachao Andolan - or the Save the Childhood Movement - in 1980 and has acted to protect the rights of 80,000 children.

“It’s an honour to all my fellow Indians. I am thankful to all those who have been supporting my striving for more than the last 30 years,” he said.

“A lot of credit goes to the Indians who fight to keep democracy so alive and so vibrant, where I was able to keep my fight on.

“Something which was born in India has gone globally and now we have the global movement against child labour. After receiving this award I feel that people will give more attention to the cause of children in the world.”

Yemeni Nobel peace laureate Tawakkol Karman said Malala and Satyarthi were worthy winners and that Satyarthi had taken part in an “outstanding and long struggle for the rights of the child”.

There were a record 278 nominations this year, 19 more than ever before – including US whistleblowers Edward Snowden and Chelsea Manning, the Russian president, Vladimir Putin, and Pope Francis. Also on the list of nominees was an anti-war clause in the Japanese constitution and the International Space Station Partnership.

Previous choices include illustrious names such as Nelson Mandela, Aung San Suu Kyi, and Martin Luther King - and, controversially, Barack Obama in 2009.

Last year’s choice of the Organisation for the Prohibition of Chemical Weapons in hindsight seems a similar act of wishful thinking. At the time the agency’s role in overseeing the destruction of Syria’s chemical arsenal offered a very slim chance of finding a diplomatic resolution to the crisis in that country. But the violence in Syria has only got worse, and there are continuing concerns that the Assad regime has continued to conceal its stockpile of chemical weapons.

The Nobel announcements have been going on all week, and willconclude with the prize for economics on Monday.

On Thursday, the Nobel committee stunned the literary world bychoosing little-known French author Patrick Modiano for the prize.

On Wednesday, Stefan Hell of the Max Planck Institute for Biophysical Chemistry, Göttingen, William Moerner of Stanford University in California, and Eric Betzig of the Howard Hughes Medical Institute in Virginia won the chemistry prize “for the development of super-resolved fluorescence microscopy”.

On Tuesday, Shuji Nakamura of the University of California, Santa Barbara, shared the physics prize with Isamu Akasaki and Hiroshi Amano of Japan for “the invention of efficient blue light-emitting diodes which has enabled bright and energy-saving white light sources”.

And on Monday, British-US scientist John O’Keefe and married couple May-Britt and Edvard Moser from Norway won the Nobel prize in physiology or medicine for discovering the brain’s “inner GPS”.

Worth 8m kronor each, the Nobel prizes are always handed out on 10 December, the anniversary of prize founder Alfred Nobel’s death in 1896. Besides the prize money, each laureate receives a diploma and a gold medal.

Nobel, a wealthy Swedish industrialist who invented dynamite, provided few directions for how to select winners, except that the prize committees should reward those who “have conferred the greatest benefit to mankind”.

• 3pm correction: A tweet attributed to Malala Yousafzai was from a fake account. This has been removed.

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Malala Yousafzai and Kailash Satyarthi win Nobel Peace prize