The work, by Professor James P Allison from the US and Professor Tasuku Honjo from Japan, has led to treatments for advanced, deadly skin cancer.
Immune checkpoint therapy has revolutionised cancer treatment, said the prize-giving Swedish Academy.
Experts say it has proved to be "strikingly effective".
Prof Allison, of the University of Texas, and Prof Honjo, of Kyoto University, will share the Nobel prize sum of nine million Swedish kronor - about $1.01 million or 870,000 euros.
Accepting the prize, Tasuku Honjo told reporters: "I want to continue my research ... so that this immune therapy will save more cancer patients than ever."
Prof Allison said: "It's a great, emotional privilege to meet cancer patients who've been successfully treated with immune checkpoint blockade. They are living proof of the power of basic science, of following our urge to learn and to understand how things work."