Chinese author Mo Yan, who left school for a life working the fields at the age of 12, has become the first Chinese citizen ever to win the Nobel prize in literature, praised by the Swedish Academy for merging "folk tales, history and the contemporary" with "hallucinatory realism".

The win makes Mo Yan the first Chinese citizen to win the Nobel in its 111-year history: although Gao Xingjian won in 2000, and was born in China, he is now a French citizen; and although Pearl Buck took the prize in 1938, for "her rich and truly epic descriptions of peasant life in China and for her biographical masterpieces", she is an American author.

The Nobel, worth eight million kronor, goes to the writer "who shall have produced in the field of literature the most outstanding work in an ideal direction", with previous winners including Samuel Beckett, Doris Lessing and, last year, the Swedish poet Tomas Tranströmer. Over the past month the Chinese press has become increasingly vocal about the possibility of a Chinese writer taking the award, with commentors equating "bagging the prize to Chinese literature gaining the world's recognition".

With the Nobel going to a European seven times in the last decade, all evidence was pointing to a winner from outside Europe, and Japanese novelist Haruki Murakami emerged as the frontrunner at betting firm Ladbrokes. Mo Yan, at 9/1, "definitely slipped under the radar", said the firm's spokesman Alex Donohue.

Born in 1955 to parents who were farmers, Mo Yan - a pseudonym for Guan Moye; the pen name means "don't speak" - grew up in Gaomi in Shandong province in north-eastern China. The cultural revolution forced him to leave school at 12, and he went to work in the fields, completing his education in the army. He published his first book in 1981, but found literary success in 1987 with Hong gaoliang jiazu (Red Sorghum), a novel that an internationally successful movie by director Zhang Yimou, set against the horrific events that unfolded as Japan invaded China in the 1930s.

"He writes about the peasantry, about life in the countryside, about people struggling to survive, struggling for their dignity, sometimes winning but most of the time losing," said permanent secretary of the Swedish Academy Peter Englund, announcing the win. "The basis for his books was laid when as a child he listened to folktales. The

description magical realism has been used about him, but I think that is belittling him – this isn't something he's picked up from Gabriel García Márquez, but something which is very much his own. With the supernatural going in to the ordinary, he's an extremely original narrator."

Informing Mo Yan of his win today, Englund said the author, who was at the home in China where he lives with his 90-year-old father – was "overjoyed and scared".

Nicky Harman, a Chinese translator and lecturer at Imperial College, London, hailed Mo Yan's win as "amazing" news. "He's a great writer and will now be better known. That's good news for all Chinese writers, because it will bring English readers a bit closer," she said. "I'm sure they will be deliriously happy in China. He's very well thought of there."

SOAS professor of Chinese Michel Hockx, who knows Mo Yan personally, said the author was probably the most translated living Chinese writer, "very well known, very respected [and] although he's had his spats with the literary censors ... generally speaking not regarded as politically sensitive".

Hockx dismissed criticism from China that the author is "too close to the establishment to merit the Nobel". "I don't like the idea that Chinese writers are only good if they challenge the government – a good writer is a good writer. It's not a good yard stick of anything; are the only good British writers the ones who speak out against the war?" he said. "Choosing a dissident is the safe choice [for the Nobel committee] – to choose an author with a strong literary reputation, because of the strength and power of his work, is a very brave choice."

Speaking to Granta earlier this year, Mo Yan – one of a group of Chinese writers to travel to the UK for the London Book Fair – said that avoiding censorship was a matter of subtlety. "Many approaches to literature have political bearings, for example in our real life there might be some sharp or sensitive issues that they do not wish to touch upon. At such a juncture a writer can inject their own imagination to isolate them from the real world or maybe they can exaggerate the situation – making sure it is bold, vivid and has the signature of our real world. So, actually I believe these limitations or censorship is great for literature creation," he said.

Mo Yan, according to Hockx, "knows how to write a good story", filling his tales of remote communities "with a magical atmosphere, without shying away from the harsh and sometimes violent realities that he has witnessed". His 1996 novel Fengru feitun, translated into English as Big Breasts and Wide Hips in 2004, starts with the story of Xuan'er, six months old in 1900 when she is abandoned in a vat of flour, and follows her family's life through the war with Japan and the cultural revolution. Wa (Frog), Mo Yan's most recent novel, tells of the consequences of the single-child policy implemented in China through the story of a rural gynaecologist.

"He expertly handles the use of local language and dialect, and as his career progressed he became increasingly experimental with his narration, to the extent that he once even made himself a character in one of his novels," said Hockx. "All his novels create unique individual realities, quite different from the political stories that were told about the countryside in the Maoist years, when Mo Yan grew up."

The eminent professor of Chinese literature Howard Goldblatt, who has translated many of Mo Yan's works into English, compared the author's writing to Dickens in a recent interview with China Daily, saying that both write "big, bold works with florid, imagistic, powerful writing and a strong moral core".

Goldblatt said that the author's satirical novel Jiuguo (The Republic of Wine) "may be the most technically innovative and sophisticated novel from China I've read", while his Shengsi pilao (Life and Death Are Wearing Me Out) is "a brilliant extended fable", and Tanxiangxing (Sandalwood Death) "is, as the author contends, musical in its beauty".