Chair of judges Marina Warner, an academic and writer, compared Krasznahorkai's work to Franz Kafka -- Krasznahorkai's own personal literary hero -- and Beckett.
"I feel we've encountered here someone of that order," she said while announcing the winner.
"That's a trick that the best writers pull off; they give you the thrill of the strange...Then after a while they imaginatively retune you. So now we say, 'it's just like being in a Kafka story'; I believe that soon we will say it's like being in a Krasznahorkai story," she said lauding his work.
The biennial Man Booker International prize is worth 60,000 pounds and is intended to honour a living author for his or her body of work, either written in English or available in English translation. The award can be won only once in an author's lifetime.
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It has gone in the past to accomplished authors like Arundhati Roy, Aravind Adiga, Ismail Kadare from Albania, Chinua Achebe from Nigeria and Canada's Alice Munro among others.
Kolkata-born, 58-year-old Ghosh had also missed out on the prize in 2008 when he was shortlisted for his work 'Sea of Poppies'.
"We really would have preferred not to have to choose a winner -- every one of the 10 writers is really remarkable in different ways and there really isn't any of them who doesn't reward reading, who couldn't have won the prize," Warner said.
But Krasznahorkai, she said, is "a visionary writer of extraordinary intensity and vocal range who captures the texture of present-day existence in scenes that are terrifying, strange, appallingly comic, and often shatteringly beautiful".
Krasznahorkai's first novel 'Satantango' was published to huge acclaim in Hungary in 1985 and was later adapted for a cinema by filmmaker Bela Tarr in collaboration with the author.
He followed it with 1989's 'The Melancholy of Resistance', published in English in 1998, in which violent hysteria follows the arrival of a circus with a dead whale in a small Hungarian town. It won the German Bestenliste prize for the best literary work of the year.