He located genes that regulate the cellular "self eating" process known as autophagy.
Dr Ohsumi's work is important because it helps explain what goes wrong in a range of illnesses, from cancer to Parkinson's.
Errors in these genes cause disease.
Last year's prize was shared by three scientists who developed treatments for malaria and other tropical diseases.
"Self-eating"
The body destroying its own cells may not sound like a good thing. But autophagy is a natural defence that our bodies use to survive.
It allows the body to cope with starvation and fight off invading bacteria and viruses, for example.
And it clears away old junk to make way for new cells.
Failure of autophagy is linked with many diseases of old age, including dementia.
Research is now ongoing to develop drugs that can target autophagy in various diseases, including cancer.
The concept of autophagy has been known for over 50 years, but it wasn't until Dr Ohsumi began studying and experimenting with baker's yeast in the 80s and 90s that the breakthrough in understanding was made.
Dr Ohsumi is reported to be surprised about receiving his Nobel Prize, but "extremely honoured".
Speaking with the Japanese broadcaster NHK he said that the human body "is always repeating the auto-decomposition process, or cannibalism, and there is a fine balance between formation and decomposition. That's what life is about."
Prof David Rubinsztein, an expert in autophagy at the University of Cambridge, said he was delighted that Dr Ohsumi's vital work had been recognised and rewarded.
"His pioneering work in yeast led to the discovery of the key genes and fundamental biochemical processes that are required for autophagy.
"As autophagy is well conserved from yeast to man, his laboratory's discoveries have also provided the critical tools to many labs to enable the appreciation of the important roles of autophagy in diverse physiological and disease processes.
"These include infectious diseases, cancers, and various neurodegenerative diseases such as Huntington's disease and forms of Parkinson's disease. Indeed, autophagy manipulation may provide a key strategy for treating some of these conditions."
More than 270 scientists were nominated for the prize, which was awarded at Sweden's Karolinska Institute and comes with eight million Swedish kronor (around £728,000 or $936,000 or 834,000 euros) for the winner.
The winners of the physics, chemistry and peace prizes are to be announced later this week.
2015 - Three scientists - William C Campbell, Satoshi Ōmura and Youyou Tu - foranti-parasite drug discoveries.
2014 - Three scientists - John O'Keefe, May-Britt Moser and Edvard Moser - fordiscovering the brain's navigating system.
2013 - James Rothman, Randy Schekman, and Thomas Sudhof for their discovery of how cells precisely transport material.
2012 - Two pioneers of stem cell research - John Gurdon and Shinya Yamanaka - were awarded the Nobel after changing adult cells into stem cells.
2011 - Bruce Beutler, Jules Hoffmann and Ralph Steinman shared the prize after revolutionising the understanding of how the body fights infection.
2010 - Robert Edwards for devising the fertility treatment IVF which led to the first "test tube baby" in July 1978.
2009 - Elizabeth Blackburn, Carol Greider and Jack Szostak for finding thetelomeres at the ends of chromosomes.
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