The Nobel judges said the 71-year-old author, whose novels sometimes consist of just one long sentence, is "a great epic writer" whose work "is characterised by absurdism and grotesque excess".
He's the first Nobel literature winner from Hungary since Imre Kertesz in 2002 and joins a list of laureates that includes Ernest Hemingway, Toni Morrison and Kazuo Ishiguro.
"I am calm and very nervous," Krasznahorkai told Radio Sweden after getting news of the prize, which comes with an award of more than $US1 million ($A1.5 million).
"This is the first day in my life when I got a Nobel Prize. I don't know what's coming in the future."
Zsuzsanna Varga, a Hungarian literature expert at the University of Glasgow, said Krasznahorkai's novels probe the "utter hopelessness of the condition of human existence," while also managing to be "incredibly funny".
Varga said Krasznahorkai's near-endless sentences made his books the Hotel California of literature — once readers get into it, "you can never leave."
Varga suggested readers new to Krasznahorkai's work start with Satantango, his 1985 debut, which centred around the few remaining residents of a dying collective farm and set the tone for what was to follow.
"Satan who is dancing a tango — I mean, how surreal can you be?" she said.
Krasznahorkai has since written more than 20 books, including The Melancholy of Resistance, a surreal, disturbing tale involving a travelling circus and a stuffed whale, and Baron Wenckheim's Homecoming, the sprawling saga of a gambling-addicted aristocrat.
Herscht 07769 from 2021 is set in a German town riven with unrest.
Written as a series of letters to then-German Chancellor Angela Merkel, it has just one period in its 400 pages.
Several works, including Satantango and The Melancholy of Resistance, were turned into films by Hungarian director Béla Tarr.
Krasznahorkai also wrote several books inspired by his travels to China and Japan, including A Mountain to the North, a Lake to the South, Paths to the West, a River to the East, published in Hungarian in 2003.
Krasznahorkai had been on the Nobel radar for some time, Nobel committee member Sem-Sandberg said, calling Krasznahorkai's literary output "almost half a century of pure excellence".
The writer was born in the southeastern Hungarian city of Gyula, near the border with Romania, and studied law at universities in Szeged and Budapest before shifting his focus to literature.
Varga, the academic, said Krasznahorkai developed a cult following among young Hungarians during the last years of communism in the 1980s, when "authors were pretty much like pop stars."
Krasznahorkai has been a vocal critic of autocratic Hungarian Prime Minister Viktor Orban, especially his government's lack of support for Ukraine after the Russian invasion.
In an interview with Swedish newspaper Svenska Dagbladet earlier this year, Krasznahorkai expressed criticism both of Orban's political system and the nationalism present in Hungarian society.
"There is no hope left in Hungary today and it is not only because of the Orban regime," he told the paper.
"The problem is not only political, but also social."
Orban congratulated the writer in a Facebook post, saying: "The pride of Hungary, the first Nobel Prize winner from Gyula, Laszlo Krasznahorkai."
Krasznahorkai received the 2015 Man Booker International Prize for his body of work and the National Book Award for Translated Literature in the US in 2019 for Baron Wenckheim's Homecoming.
He said none of his career was planned.
"I wanted at first to write only one book. And I didn't want to be a writer," he told Swedish radio, but re-reading his first novel, he discovered it wasn't perfect.
"I started to write another one because I wanted to correct Satantango," he said, and later, "I tried to write a new book to correct the first two. ... My life is a permanent correction."
Éva Rédei, the longtime owner of one of Budapest's oldest independent booksellers, said Krasznahorkai was "an exceptionally demanding and sophisticated author" and his Nobel Prize was "long overdue".
