US author George Saunders won the Story Prize for his bestselling short story collection Tenth of December, which has been lauded for its formal innovation and keen eye to people’s darker aspects.

Saunders, 55, topped finalists Andrea Barrett’s Archangel collection and Rebecca Lee’s Bobcat for the $20,000 prize, the richest among annual literary fiction honours in the US.

Saunders, who lives in New York and teaches creative writing at Syracuse University, was given the award at a ceremony at the New School in New York.

“George Saunders offers a vision and version of our world that takes into account the serious menace all around us without denying the absurd pleasures that punctuate life,” the judges said in a statement.

“This book is very funny and very sad.”

The author’s previous collection of short stories, 2006’s In Persuasion Nation, was also a finalist for the award.

Saunders has authored five additional books and was included on Time magazine’s list of the 100 most influential people in the world last year.

Past winners of the Story Prize, which is underwritten by the Mississippi-based Chisholm Foundation, include Claire Vaye Watkins, Mary Gordon, Jim Shepard, Tobias Wolff and Steven Millhauser.