The five-times Grammy winner, described by the organizers of Sweden's Polar Music Prize as "one of the greatest singer-songwriters in international music", sings her in native Fon and Yoruba languages as well as in French and English.
Dubbed "Africa's premier diva" by Time magazine, she is best known for her hits "Agolo" and "We We."
Blackwell founded the Island Records label in Jamaica that went on to sign such legendary stars as Bob Marley, Cat Stevens, Roxy Music and U2.
Estonia's Arvo Part, who the jury described as "the world's most performed living composer", was highlighted for his "unique compositional technique, tintinnabuli" which he invented in the 1970s.
The Polar Music Prize was founded in 1989 by former ABBA manager Stig Anderson and last year honoured Iggy Pop and US songwriter Diane Warren.
The laureates will receive their 600,000 kroner ($58,000) prize at a ceremony in Stockholm on May 23.