The 60-year-old children's rights campaigner was recognised for his battle against child trafficking with Bachpan Bachao Andolan - or Save the Childhood Movement - a group he founded in 1980 after quitting his job as an electrical engineer.
"It's a great statement from the Nobel committee, looking at the present scenario in India and Pakistan," Satyarthi told reporters who besieged his office in New Delhi after the prize was announced in Oslo.
"Beside our fight against child slavery and against the menace of illiteracy on the subcontinent and globally, we hope both of us will be able to fight for peace," he said referring to Malala, a campaigner for girls' education rights who, at the age of 17, became the youngest Nobel Prize winner ever.
"I will talk to Malala soon. I know her, and I will invite her to join hands to establish peace for our subcontinent - which is a must for children, which is a must for every Indian, for every Pakistani, for every citizen of the world."
India and Pakistan have engaged in heavy shelling across the frontier of the disputed territory of Kashmir for more than a week, killing nine Pakistani and eight Indian civilians in the worst violence in more than a decade.
The conflict, along a 200-km (125-mile) frontier stretch, has raised fears of escalation between the nuclear-armed rivals, which have fought two of their three wars over the mainly Muslim region since partition and independence in 1947.
Indian Prime Minister Narendra Modi, who has taken a tough line on Pakistan since his general election victory in May, congratulated Satyarthi.
In a tweet, Modi said: "Kailash Satyarthi has devoted his life to a cause that is extremely relevant to entire humankind. I salute his determined efforts." He also described Malala's life as "a journey of immense grit & courage".
SCOURGE OF CHILD LABOUR
Satyarthi estimates that 60 million children in India, or 6 percent of the population, are forced into work.
This, he believes, has nothing to do with parental poverty, illiteracy or ignorance. Above all, children are enslaved because employers benefit by getting their labour for free or for a pittance.
In his first public reaction, Satyarthi dedicated the Peace Prize to them: "It's an honour to all those children who are still suffering in slavery, bonded labour and trafficking," he told CNN-IBN news television.
Over many years, Satyarthi has taken his campaign to the streets of India. In one operation this May, police rescued 63 children and arrested 23 suspected child traffickers at Old Delhi railway station, acting on a tipoff from Satyarthi.
Some 30 million people are enslaved worldwide, trafficked into brothels, forced into manual labour, victims of debt bondage or even born into servitude, a global index on modern slavery showed in October last year.
Almost half are in India, where slavery ranges from bonded labour in quarries and kilns to domestic work and commercial sex exploitation.
"It's not just about India," the bearded, bespectacled Satyarthi, wearing a traditional beige kurta, said as reporters thronged around him. "It's a crime against humanity if a child is deprived of childhood - in my country or any country in the world. Humanity is at stake."
NOT GANDHI BUT OTHERS
Satyarthi joins a handful of Nobel Peace Prize winners with ties to India - even though the most famous peace activist of them all and father of independent India, Mahatma Gandhi, never received the honour.
Mother Theresa, an Albanian-born nun, was recognised in 1979 for her work with the poor in the Indian port city of Calcutta. The Dalai Lama, the exiled Tibetan spiritual leader who won the prize in 1989, resides in India.
Satyarthi first became aware of the injustice of child labour on his first day at primary school in the central Indian state of Madhya Pradesh, when he saw a child and his father working as cobblers.
"Since then I've been fighting," he said. "But it was not an issue in my country or elsewhere until 1980 or 1981, when I started working on it with my colleagues."
His work is not finished.
"I promise you that I'm not going to give up at any cost and I'll see the end of child labour in my lifetime," said Satyarthi, who lives in New Delhi with his wife, son and daughter.
"I'm very optimistic about it because I've seen the journey. I've seen the shift in the last three decades - how child labour has become an issue, how new laws have been enacted in India and globally, how the corporates are getting more responsible."