The novel, about a Polish boy rescued from a ruined city by a Greek archaeologist during the Second World War, beat off strong opposition from E. Annie Proulx and Margaret Atwood to win the pounds 30,000 prize.
Canadian author Michaels, 39, prepared herself for failure at the outset - "I was never sure where I was going to come out" - and last week was insistent that her novel simply could not win. The bookmakers agreed, making her the rank outsider.
Fugitive Pieces, she said, was a highly personal project, 10 years in the making. It was written mainly for herself, she said, "to enable me to ask the questions I needed to ask".
"It was such a personal thing for me that, for years, I wouldn't even tell anyone what it was about. About six years ago, as I was writing it, a friend of mine was complaining about there being so many books about the Holocaust, but it didn't put me off. It just made me think, if this is where we've come to, this is precisely why I need to write my book about the Holocaust."
Fugitive Pieces, a profoundly archaeological book in its imagery and structure, digs deep within the subject to give new resonance to the events of World War Two and the Holocaust.
Its power comes not from the bigger events of the war in Nazi occupied Greece and Poland, which are more often recalled in the third person, but in its details. There is the woman, Mrs Serinof, who begs to die in her own home out of sight but is shot instead in front of her favourite shop. There is the image of Jakob, the Polish boy who grows up to become a poet, emerging from the peat bog at the site of an archaeological dig at Biskupin where he has been hiding, like a preserved prehistoric creature, yelling the only phrase he knew in more than one language. "I screamed it in Polish and German and Yiddish, thumping my own fists on my chests: 'Dirty Jew, Dirty Jew, Dirty Jew'."
The novel clearly has a deep personal meaning for Michaels but she refuses to say what it is. Nor will she say whether or not she herself is Jewish. She says she is not interested in talking about herself, because the book is too important. "Let Jakob's story be the one that's told," she said. "I will only say that I had questions I wanted answered. I wanted to know whether faith was possible after such a catastrophe, to know whether answers could be found in the physical world, how to live better and love better. Something has to be personally at stake for me to write."
Her answers are Jakob's, the bog boy who spends his life searching and grieving for his sister, Bella. "Jakob learns that the earth remembers and that helps him to learn how to let the physical world carry some of his grief."
In this way, the six million Jews killed by the Nazis become part of the earth of Greece and Poland and Germany. And though the evidence of the Holocaust is of man's capacity for great evil, Michaels finds in acts of great courage by ordinary people man's great capacity for good: "Jakob's conclusion is that 'there is nothing a man will not do to another; nothing that a man will not do for another'."
From the opening sentences - "time is a blind guide. Bog-boy, I've surfaced into the miry streets of the drowned city" - Fugitive Pieces is more a narrative poem than a novel. Read aloud, especially by Michaels, it is as musical as it is lyrical.
As well as her parallel Toronto careers of poet, waitress, novelist and drama teacher, Michaels writes scores for theatre. She likens writing music to fiction. "One of the powers of music is that it engages with your emotions and your memory before you can defend yourself against it," she said. "It by-passes your defences. Images can do the same. I have written a book that slows the reader down to think about the ideas embedded in the images."
As she announced the Orange shortlist, Lisa Jardine, literature professor and chair of the judges, attacked English fiction for wallowing in domestic dramas and mid-life crises rather than themes with seismic implications.
Michaels has achieved a novel filled with both - set across two continents and over 60 years and dealing with what may be history's greatest catastrophe, but also full of affairs and cookery and domestic mini-dramas in post- war Toronto.
Previously she has published two acclaimed collections of poetry: The Weight of Oranges, which won the Commonwealth Prize for the Americas and Miner's Pond, which received the Canadian Authors' Association Award. In winning the Orange Prize, Michaels' fears of failure have been confounded, leaving her with a new alarm at success. After her win, she simply could not accept that she had written not just a good novel but a great one: one that finds poetry amid the barbarism of the Holocaust.
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