Archbishop Desmond Tutu has won this year's Templeton Prize which honours people who have made "an exceptional contribution to affirming life's spiritual dimension".

The former Archbishop of Cape Town rose to prominence with his calls for justice and racial equality during apartheid in South Africa.

He remains a highly respected figure on the international scene speaking into issues like peace, democracy and human rights.

In the past, he has called for the decriminalisation of homosexuality worldwide and recently said Tony Blair and George W Bush should stand trial over the Iraq war.

Earlier this year, he met Burma opposition leader Aung San Suu Kyi at her home in Rangoon and encouraged the Burmese government to continue with pro-democratic reforms.

The John Templeton Foundation said Tutu was chosen as the winner of this year's prize for his lifelong work in "advancing spiritual principles such as love and forgiveness which has helped to liberate people around the world".

"His deep faith and commitment to prayer and worship provides the foundation for his message of love and forgiveness," the foundation said.

"He has created that message through extensive contemplation of such profound 'Big Questions' as 'Do we live in a moral universe?' and 'What is humanity's duty to reflect and live God's purposes?'"

The current Archbishop of Cape Town, the Most Reverend Dr Thabo Makgoba, offered his "hearty congratulations" to Tutu on behalf of the Anglican Church of Southern Africa.

"The greatest lesson we should learn from him is that his life is steeped in prayer, and these deep wells resource all that he does, giving him a particular gift for expressing profound truths with great simplicity," he said.

"During our darkest, bleakest, hours, he was able to see the bigger picture – the picture that we remember in this Easter season, that good will always prevail – and so he gave us a vision of hope for abundant life for everyone, transformed through God's promises.

"It is a vision with which he continues to challenge the whole world today. We need to hear that challenge, and I hope this prize will encourage him to keep on raising his voice where it needs to be heard."

A celebration will be held on 11 April at St George's Cathedral, Cape Town, where Tutu served from 1986 to 1996. The place came to be known as "the people's cathedral" for its role in the fight against apartheid.

The prize will be presented to Tutu at a ceremony at the Guildhall in London on 21 May.