The Genesis Prize Foundation said Bloomberg was honored as the first winner for his long record of public service and philanthropy.
Israeli Prime Minister Benjamin Netanyahu will present the prize to Bloomberg early next year in Israel. Bloomberg will then announce to which philanthropic cause he will donate the money.
Bloomberg, whose third and final term as New York mayor is drawing to an end, said he was honored to be the prize's first recipient.
Bloomberg beat out 200 other nominees for the prize, which the foundation said was established "to recognize exceptional human beings who, through their outstanding achievement, come to represent a fundamental value of the Jewish people – a commitment to the betterment of mankind."
The prize is administered by a partnership that includes the office of the Israeli prime minister, the semi-governmental Jewish Agency and the Genesis Philanthropy Group.
Nobel Prize laureate Elie Wiesel, a member of the selection committee, said Bloomberg set a high bar for the new award.
"It is a great honor for the entire Jewish people to celebrate his achievements, his commitment to improving the world, and in particular his city: New York," Wiesel said. "We are certain that his selection as the recipient of the Genesis Prize will serve as an inspiration to young Jews and others across the globe."