Hu Jia, one of China's best-known dissidents, was yesterday awarded an EU human rights prize, despite a warning from Beijing that selecting the political prisoner would damage relations.

His wife and supporters welcomed the news that MEPs had picked him for the Sakharov prize, worth €50,000 (£39,500) Previous recipients include Nelson Mandela and the East Timorese leader, Xanana Gusmao.

"Hu Jia is one of the real defenders of human rights in the People's Republic of China," said Hans-Gert Poettering, president of the European parliament.

Hu was sentenced to three and a half years in jail this spring on subversion charges, amid what human rights campaigners described as a coordinated crackdown on activists before the Olympics.

Hu's wife, Zeng Jinyan, welcomed the award as a sign that Europe was paying attention to human rights in China and was concerned about her husband's case.

Zeng, who has also been under house arrest, along with the couple's baby, told the Guardian: "It is also a [sign of] approval of his work. I guess he must be very glad if he knows about it."

But she said the family's situation was improving and that she was able to go out comparatively freely. She visited Hu yesterday and guards allowed him to hold their child for the first time. Supporters have been concerned about Hu's health because he suffers from liver disease.

There have been some signs recently of the authorities relaxing strict controls on dissidents now the Olympics are over.

But in a letter to Poettering last week, China's ambassador to the EU wrote: "If the European parliament should award this prize to Hu Jia, that would inevitably hurt the Chinese people once again and bring serious damage to China-EU relations."

Qin Gang, a spokesman for the foreign ministry, told a press conference in Beijing: "To issue an award to such a criminal is interference in China's judicial sovereignty and totally against the initial purpose of this prize."