Goebbels will claim the award, named after 19th century Norwegian playwright Henrik Ibsen, later in the year along with 2.5 million Norwegian crowns ($437,200)-- which the organizers said was the largest amount of prize money for any theatre award on the planet.
The award's panel of judges, made up of senior figures within the world of theatre, described Goebbels as one of the "great creative personalities of today."
"He is a true innovator and his works defy conventional definition," the panel said in a statement.
"He has explored and expanded the relationship between theatre and music and in doing so has developed the elements of theatre in a way that has opened up new insights and possibilities," the panel said.
Primarily a composer, Goebbels's work has been performed in over 50 countries, and ranged from large-scale productions in opera houses to a wordless installation for the theatre.
"The recognition means a lot to me," the 60-year-old told Reuters. "I'm trying to experiment with the medium of theatre and research ground that has not been covered. This can be a big risk as you're not really in the system of theatre."
Sounds often clash with the visual elements on stage in his work, giving productions a surreal quality.
"I work with theatre from a musical side but I also try to divide from what you can see, and open a space between the two," Goebbels said.
The prize, which was founded in 2007, is funded by the Norwegian government and awarded every two years on Ibsen's birthday to an individual or institution that has brought a new artistic dimension to drama or theater.
Previous winners include English director Peter Brook, whose works include the 1963 film adaptation of "Lord of the Flies" and numerous productions at the experimental theatre Bouffes du Nord in Paris.
The award ceremony will take place during the International Ibsen Festival at the National Theatre in Oslo in September, where Goebbels' work "Eraritjaritjaka" will be performed.
($1 = 5.7180 Norwegian crowns)
(Editing by Paul Casciato)
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