Essayist and novelist Mishra has been selected for the prestigious Windham Campbell Literature prize in the non-fiction category, Yale University said on Saturday.
"Pursuing high standards of literary style, Pankaj Mishra gives us new narratives about the evolution of modern Asia," the university said.
The winners in the three categories - fiction, non- fiction and drama - will receive $1,50,000 each in recognition of their achievements and to support their ongoing work.
"Such delightful news! As a freelancer obliged to make a living from writing, you are always scrounging for bits of time in which to write the next book, and this wonderfully generous prize will help me secure a long undistracted period," Mishra said.
In addition to a novel, "The Romantics", Mishra has published four works of non-fiction including "From the Ruins of Empire: The Intellectuals Who Remade Asia".
The 2014 prizewinners are: in fiction, Aminatta Forna (Sierra Leone), Nadeem Aslam (Pakistan), and Jim Crace (United Kingdom); in non-fiction, Pankaj Mishra (India) and John Vaillant (United States/Canada); and in drama, Kia Corthron (United States), Sam Holcroft (United Kingdom) and Noelle Janaczewska (Australia).
The writers didn't know that they had been nominated, and their responses to winning the prizes ran the gamut from "shock to gratitude".
It was Donald Windham's wish to support writers by giving them the time and financial independence to write.
Aminatta Forna, a Sierra Leonean novelist based in the United Kingdom said, "the Windham Campbell Prize offers a writer what we most crave - time to write, free from deadlines, financial pressures, the expectations of others."
British playwright Sam Holcroft, the youngest of the prize winners at age 31, was quite emotional when she learned she had won.
"I'm stunned, overwhelmed - and frankly, slightly unhinged - to be named as a recipient of the Windham Campbell Prize," said Holcroft.
Pakistani novelist Nadeem Aslam's gave a lyrical response. "Artists are moths, chewing holes in the robes of the powerful and the unjust", he said.
All eight writers will accept the prize in person at a ceremony at Yale on September 15 this year.
"I can't think of a more appropriate setting to announce the winners of a global literary prize than here at Yale's Beinecke Rare Book and Manuscript Library," said Peter Salovey, Yale President while announcing the winners.