Designed with Long & Kentish, the modest Modern art gallery extension saw off an impressive shortlist to win the prestigious gong for the best museum of the year.
The scheme beat BDP's £35 million Kelvingrove Art Gallery and Museum in Glasgow, and two projects by Purcell Miller Tritton - the revamp of Weston Park Museum in Sheffield and the restoration of George III's country retreat Kew Palace.
The competition jury was 'won over by the flair and sensitivity with which the new [Pallant House] building has been integrated with the original Queen Anne House'.
Speaking about the selection process, Francine Stock, the chair of the judges said: 'Each of the four shortlisted museums and galleries was vivid and exciting - our decision came only after impassioned, sometimes agonised, debate.'
She added: 'We're delighted finally to award this prize to a jewel of a gallery.'
It is understood the gallery, which spent £8.5 million on its overhaul, will now use the cash windfall to scrap its £6.50 entry fee.