Understanding the science behind the process, called "autophagy" or "self-eating", has led to a better understanding of diseases such as cancer, Parkinson's and type 2 diabetes, the prize committee said in its statement on Monday.
Ohsumi, born in 1945 in Fukuoka, Japan, has been a professor at the Tokyo Institute of Technology since 2009.
Ohsumi's work - carried out in the 1990s and described by commentators as "paradigm-shifting" and "pioneering" - included locating the genes that regulate autophagy. This is important for medicine because it helps show why errors in these genes can contribute to a range of diseases.
The Physiology or Medicine prize, the first of the Nobel prizes awarded each year, is worth 8 million Swedish crowns (US$933,000).