The duo will share the Nobel prize sum of nine million Swedish kronor (about $1.01 million or 870,000 euros).
Other cancer treatments have previously been awarded Nobel prizes, including methods for hormone treatment for prostate cancer in 1966, chemotherapy in 1988 and bone marrow transplantation for leukaemia in 1990.
Their work constitutes a "landmark in our fight against cancer", said the Nobel Assembly of the Karolinska Institute, which awarded the prize.
Honjo intends to donate his prize money to a foundation supporting young researchers, according to officials of Kyoto University. When these brakes are neutralized, the white blood cells can get to work on destroying cancer cells.
Lanier, who like Allison is a center director for the Parker Institute for Cancer Immunotherapy, says he is thrilled that such basic research was recognized.
Allison studied a protein that functions as a brake on the immune system. Allison conducted the research at the University of California-Berkeley.
Nobel officials will announce the physics prize on Tuesday.
Allison plans to continue his research, focusing on the intricacies of the immune system's response to cancer and identifying new targets for potential treatment.
The findings by the two researchers gave boost to research against fighting cancer. Allison and Honjo have "revolutionised cancer treatment" and "fundamentally changed the way we view how cancer can be managed", the five-strong panel continued. One cancer doctor said "an untold number of lives. have been saved by the science that they pioneered".
The victor of the Nobel Peace Prize will be announced on October 5.
Independently, Honjo had discovered PD-1, another protein in T-cells.
Japan's leader said over a speaker phone that Honjo's research had given many patients hope.
This type of therapy is a new approach in cancer treatment.
Such a discovery led to the development of therapies in 2012 that proved to be incredibly effective in our ongoing effort to eliminate cancer. Carter announced in 2016 that he no longer needed treatment.
In December, Allison will be honored at the Nobel ceremonies in Stockholm - and he said that he looks forward to seeing fellow honoree Honjo in Stockholm, as well.
After the announcement of the winners, the supporters and well wishers started to celebrate the victory.