The leader of the Roman Catholic Church edged out nine other finalists, including National Security Agency leaker Edward Snowden and gay marriage advocate Edith Windsor, for the honor.
Obama was Time's 2012 Person of the Year. But the pope, who the magazine said has changed the tone of the church since succeeding Pope Benedict earlier this year, was selected this year's POY recipient, given to someone who has the "most impact on our lives, for better or worse."
"Rarely has a new player on the world stage captured so much attention so quickly — young and old, faithful and cynical — as has Pope Francis," Time managing editor Nancy Gibbs wrote. "In his nine months in office, he has placed himself at the very center of the central conversations of our time: about wealth and poverty, fairness and justice, transparency, modernity, globalization, the role of women, the nature of marriage, the temptations of power.
"He is embracing complexity and acknowledging the risk that a church obsessed with its own rights and righteousness could inflict more wounds than it heals," Gibbs continued.
Francis was chosen, she added, "for pulling the papacy out of the palace and into the streets, for committing the world’s largest church to confronting its deepest needs, and for balancing judgment with mercy."
The Vatican issued a statement on Francis' selection.
"The Holy Father is not looking to become famous or to receive honors," a Vatican spokesman said. "But if the choice of Person of Year helps spread the message of the gospel — a message of God's love for everyone — he will certainly be happy about that."
Francis, who maintains a lively Twitter feed with the @Pontifex handle, has yet to tweet a response to the news.
For Time, the pope was deemed more worthy than several controversial figures, including Sen. Ted Cruz, the tea party Republican whose anti-Obamacare stand on Capitol Hill led to a partial government shutdown; Syrian President Bashar Assad, who the United States says was behind the deadly chemical attack on the Syrian people; and Snowden, who fled to China and then Russia after blowing the whistle on the NSA's spying activities.
WikiLeaks, which supported Snowden, called the choice of Francis "cowardly," noting that its founder, Julian Assange, was snubbed by the magazine in 2010.
Snowden wasn't the only snub. Miley Cyrus, whose bizarre "twerking" at the MTV Video Music Awards in September made the former "Hannah Montana" star a water-cooler staple, was tabbed an unlikely favorite when she was revealed to be among the 10 finalists.
The top five finalists, as ranked by Time:
1. Pope Francis
2. Edward Snowden
3. Edith Windsor
4. Bashar Assad
5. Ted Cruz
What do you think of Time’s Person of the Year selection? Let us know in the comments section.