Tokarczuk was awarded “for a narrative imagination that with encyclopedic passion represents the crossing of boundaries as a form of life,” the academy said.
Handke was awarded “for an influential work that with linguistic ingenuity has explored the periphery and the specificity of human experience,” it said.
Due to a scandal, the 2018 prize was delayed from last year.
Nobel week will continue on Friday with the prestigious Peace Prize.
Next Monday the academy will announce the Nobel in Economics.