Nyong'o, 31, told the magazine that she "never dreamed" that she would receive the honor.
"It was exciting and just a major, major compliment," she told People. "I was happy for all the girls who would see me on [it] and feel a little more seen."
She joins a group of A-listers who have graced the cover of People's Most Beautiful issue, including Julia Roberts, Beyonce and Gwyneth Paltrow.
Other celebrities who made People's list this year include Keri Russell, Jenna Dewan-Tatum, Mindy Kaling and Amber Heard.