Bernanke, together with Douglas Diamond and Philip Dybvig, were honoured for having "significantly improved our understanding of the role of banks in the economy, particularly during financial crises, as well as how to regulate financial markets", the jury said.
Bernanke, 68, has been both credited for spurring recovery after the 2008 recession and pilloried by critics for doing little to avert it, allowing investment bank Lehman Brothers to collapse.
He received the award for his analysis, conducted in the early 1980s, of the Great Depression in the 1930s, the worst economic crisis in modern history.
In particular, Bernanke showed "how failing banks played a decisive role in the global depression," making the downturn "not only deep, but also long-lasting," the Nobel jury noted.
In his role as chief of the central bank, Bernanke "was able to put knowledge from research into policy" during the financial crisis of 2008-2009, the Nobel Committee said.
Bernanke has been hailed for the Fed's unorthodox response of slashing interest rates and flooding the financial system with liquidity.
- Bank runs -
Diamond, a professor at the University of Chicago born in 1953, and Dybvig, 67, a professor at Washington University in St. Louis, were honoured for showing how "banks offer an optimal solution" for channelling savings to investments by acting as an intermediary.
The pair also showed how these institutions were vulnerable to so called bank runs, where a large number of savers simultaneously withdraw their money leading to the bank's collapse.
The committee added that this dangerous dynamic can be avoided by governments providing deposit insurance and giving banks a life-line by becoming a lender of last resort.
"In a nutshell, the theory says that banks can be tremendously useful but they are only guaranteed to be stable if they are properly regulated", Tore Ellingsen, chair of the prize committee, said.
Diamond, speaking to reporters after the announcement, reflected Monday on the decision by US authorities not to bail out Lehman Brothers, as they later did other financial institutions.
The bank's collapse sent shockwaves through financial markets when it filed for bankruptcy in September 2008.
"It would have been better to find a more accommodating way, a less unstable way and unexpected way to resolve Lehman Brothers," Diamond said, stressing there were questions about what regulators were legally able to do at the time.
"Had they found a way, I think the world would have had less of a severe crisis than it did," Diamond said.
Speaking in an interview with the Nobel Foundation, Diamond also praised the work of his fellow laureate.
"The world was incredibly lucky to have Ben Bernanke sitting in the Federal Reserve during the crisis," Diamond said.
- Few women -
Of all the Nobels, the economics prize has the fewest number of female winners: just two since it was first awarded in 1969, Elinor Ostrom in 2009 and Esther Duflo in 2019.
This year, only two women were among the 12 individuals and two organisations honoured, Carolyn Bertozzi in chemistry and Annie Ernaux for literature.
Hans Ellegren, secretary general of the Royal Swedish Academy of Sciences, told AFP that since the science prizes generally honour research dating back decades, laureates who win "now reflect what the scientific community looked like back then."
"I'm rather glad to be able to say that we have increased the proportion of women that get Nobel Prizes," Ellegren said.
He noted that in the last five years, four women had been awarded the chemistry prize and two had received the physics prize, which has been a male-dominated field.
The economics prize, created by the Swedish central bank in 1968, was the only award not included when scientist Alfred Nobel created the prestigious awards in his 1895 will.
But like the other prizes it comes with a gold medal and an award sum of 10 million Swedish kronor (around $900,000).
The winners will receive the prize from King Carl XVI Gustaf at a formal ceremony in Stockholm on December 10, the anniversary of the 1896 death of scientist Alfred Nobel.