Alfred Nobel, a Swedish Chemist invented dynamite in 1867 and became very rich. Dynamite made the business of blasting a much safer experience than was common in the days of nitroglycerine. Nobel, an optimist, believed that dynamite would make war obsolete (a theme that seems familiar in the nuclear age). He said:
My factories may make an end of war sooner than your congresses. The day when two army corps can annihilate each other in one second, all civilized nations, it is to be hoped, will recoil from war and discharge their troops.
He was wrong, and when his brother died in 1888, a French newspaper mistakenly published an obituary for Alfred Nobel. It said Nobel would be remembered as an odious "merchant of death". Nobel was horrified. He had never married, and this was to be his legacy. In secret, he rewrote his will.

When he died alone in 1896, his will was opened. To the surprise of everyone, he had bequeathed 94% of his fortune for the establishment of five prizes (physics, chemistry, medicine, literature, and peace), to be handed out by the Norwegian Parliament to "those who, during the preceding year, shall have conferred the greatest benefit on mankind". There was much debate over Nobel's intentions (e.g. why Norway? He's Swedish!) and it took five years to set up the fund. On the fifth anniversary of Nobel's death, on December 10, 1901, the first prizes were awarded:

Chemistry: Jacobus H. van't Hoff
Physics: Wilhelm Conrad Röntgen
Medicine: Emil A. von Behring
Literature: Rene F. A. Sully Prudhomme
Peace: Jean H. Dunant and Frederic Passy

Alfred Nobel did not set up the prize for Economics. There is an Urban Legend that Nobel didn't set up a prize for Mathematics because his wife had been sleeping with a Mathematician. Since he never married, this is plainly incorrect.