The award, worth 60,000 pounds, is given every two years to a living author for a body of work that has contributed to an achievement in fiction on the world stage.
The first Man Booker prize was awarded to Ismail Kadare, from Albania, in 2005, and the second went to Nigerian writer Chinua Achebe in 2007.
"I am totally amazed and delighted," the Telegraph quoted Munro, 77, from Canada as saying.
Munro's stories frequently appear in publications such as the New Yorker and the Paris Review.
She will receive the prize and a trophy at a ceremony on June 25 at Trinity College, Dublin.
Munro's first collection of stories, Dance Of The Happy Shades was published in 1968 and has also garnered the Governor General's Award, Canada's literary prize.
Another collection titled 'Lives Of Girls And Women in 1971 won the Canadian Booksellers Association International Book Year Award.
In 1980 The Beggar Maid was shortlisted for the annual Booker Prize for Fiction.
"Alice Munro is mostly known as a short story writer and yet she brings as much depth, wisdom and precision to every story as most novelists bring to a lifetime of novels," the judging panel said in a statement.
"To read Alice Munro is to learn something every time that you never thought of before," the panel added.