The Bangladesh-origin author joins a distinguished list of writers like D H Lawrence, Graham Greene, Angela Carter and Ian McEwan to have won the Prizes, awarded annually by the University of Edinburgh since 1919.
The book, which won the best work of fiction for the year 2014, took home a prize money of 10,000 pounds.
"The award was announced on August 17 by broadcaster Sally Magnusson at the Edinburgh International Book Festival," publishers Pan Macmillan, who published the book under the Picador India imprint, said in a statement today.
"The novel's impressive scope is complemented by Rahman's ability to locate the personal in the political," he said.
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Born in rural Bangladesh, Zia Haider Rahman was educated at Balliol College, Oxford, and at Cambridge, Munich, and Yale Universities. He has worked as an investment banker on Wall Street and as an international human-rights lawyer.
The novel takes readers on a journey ranging over Kabul, London, New York, Islamabad, Oxford, Princeton, and Sylhet, and deals with love, philosophy, identity, finance, mathematics, cognitive science, literature, and war.
"The framework is an age-old story: the friendship of two men and the betrayal of one by the other. But within this framework the author has touched down on everything important in our young century and has translated all this into his fiction," publishers said.
Each year more than 400 novels are read by academics and postgraduate students who nominate books for the shortlist.
Two prizes are awarded annually by the university for books published during the previous year - one for the best work of fiction and the other for best biography.