The 17-year-old founder of School Strike for Climate, won the inaugural Gulbenkian Prize for Humanity.
Judges described her as "one of the most remarkable figures of our days".
Ms Thunberg said she will be donating the prize money to charitable projects that are combating "the climate and ecological crisis".
As well as being awarded Time Magazine's Person of the Year in 2019, Ms Thunberg has been nominated twice for the Nobel Peace Prize.
Responding to the news, she said: "I am extremely honoured to receive the Gulbenkian Prize for Humanity.
"We're in a climate emergency, and my foundation will as quickly as possible donate all the prize money of one million euros to support organisations and projects that are fight for a sustainable world."
The prize, awarded each year, aims to "recognise people, groups of people and/or organisations from all over the world whose contributions to mitigation and adaptation to climate change stand out for its novelty, innovation and impact".
Chairman of the prize's grand jury Jorge Sampaio applauded the teenagers ability to mobilise the younger generation, adding: "her tenacious struggle to alter a status quo that persists, makes her one of the most remarkable figures of our days".
The prize is part of the Calouste Gulbenkian Foundation, which was established in 1956. It is a Portuguese philanthropic institute `"dedicated to the promotion of arts, charity, science, and education".
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