Barroso paid tribute to Merkel for her leadership during the six-month German presidency which, following the ‘No' votes against the EU treaty in France and the Netherlands, culminated in the adoption of the Berlin Declaration to mark the 50th anniversary of the Treaty of Rome.
“The agreement among all 27 heads of state and governments on this declaration ... marked a crucial step towards creating a new momentum for Europe and the new EU treaty,” Barroso said.
“Everyone acknowledges that the commitment, the will and the determination of Angela Merkel were decisive in achieving the desired result.”
He described Merkel as “born of the best traditions of Germany's European policy”.
In her acceptance speech Merkel said that Europe's experience of putting years of conflict behind it should be a model for other regions of the world.
The ceremony was attended by King Juan Carlos of Spain, Jean-Claude Trichet, the president of the European Central Bank, Nicolas Sarkozy, the president of France and Javier Solana, the EU's foreign policy chief.
The Charlemagne Prize was founded in 1950 for services to European unification. Previous winners of the award include Jean Monnet, Konrad Adenauer, Robert Schuman and Edward Heath.
Merkel is the fourth woman and first German since 1997 to be awarded the prize.