The UN Palestinian refugee agency UNRWA, which has launched a massive $1.6 billion appeal for aid for Gaza, said she would be donating all $50,000 of her World's Children's Prize to help rebuild schools in Gaza.
Yousafzai began speaking out for the rights of girls at age 11 in her country and was shot in the head by a Taliban gunman two years ago. She was flown to Britain for treatment but said she doesn't remember the shooting except for the "severe pain" when recovering.
"This award is not just for this one girl called Malala, this award is especially for children who are out of school," she said in an interview with Swedish broadcaster SVT. "I'm really happy and honored that this time this award was from children; children voted for me."
Yousafzai said the annual prize, worth $50,000 in money that is traditionally donated to children's causes, is a sign that children strongly support the right to education.
"It shows that now children are standing up for their rights, they say that education for every child," she said.
"This money will totally go to the rebuilding of schools for children in Gaza, so I think it will definitely help those children to continue their education, to get quality education," the 17-year-old Pakistani told a press conference in Sweden at the awards ceremony.
"We already know how children have suffered in Gaza from conflicts and war, so those children need our support right now, because they are going through many difficult situations."
Malala said of the situation in Gaza, "The needs are overwhelming – more than half of Gaza's population is under 18 years of age. They want and deserve quality education, hope and real opportunities to build a future."
The donation will help rebuild 65 schools that were damaged during Operation Protective Edge. According to UNRWA, there are a quarter of a million UNRWA students in Gaza as well as 9,000 UN teaching staff.
UNRWA Commissioner General Pierre Krahenbuhl thanked Yousafzai and said, "UNRWA shares with you the profound belief in the importance of education as a means to lift young girls and boys out of isolation, exclusion or oppression. Acquiring skills and knowledge to improve prospects for the future is profoundly engrained in the Palestinian consciousness."
UNRWA announced it is providing aid to over 40,000 displaced people in Gaza including food, water and sanitation services as well as psycho-social support, cash grants for the homeless and urgent repairs to 118 UNRWA installations in Gaza.
Ynetnews and the Associated Press contributed to this report.