The Norwegian DJ, a key figure in the tropical house genre that has won a growing following, reached the billion-mark in a little more than a year.
Kygo's first major solo release came in December 2014 -- "Firestone," a mellow dance track that gradually builds to the vocals of Australian singer Conrad Sewell.
He later followed up the success with the track "Stole the Show."
While hailing Kygo on his own merits, Spotify cited his success as an example of the possibilities of streaming, which offers unlimited, on-demand music online.
Spotify, the leading streaming site, has faced accusations from a number of artists that it pays back too little for musicians to earn a living.
The Swedish company said that it quickly identified Kygo and cooperated closely with his label, Sony's electronic-oriented Ultra Music.
Spotify said it first worked to promote "Firestone" in Europe before launching a global push to acquaint its users with Kygo.
"We knew when we signed him that he had a fanatical following, and we were really able to harness that with the support of Spotify as a global partner on the project," Toby Andrews, head of electronic music marketing for Sony Music International, said in a statement.
The 24-year-old DJ is set to release a debut album in 2016.
Spotify said that other recent stars -- such as British soul singer Sam Smith, the big winner at the last Grammy Awards -- usually needed two years to reach the billion-stream mark.
But Spotify and its competitors -- such as Apple Music, Deezer, Google Play Music and Tidal -- have seen rapid growth in the past few years.
For the year as a whole, Canadian rapper Drake was the most streamed artist on Spotify, despite his close relationship with Apple Music.
"Lean On," the downtempo dance track by Major Lazer featuring DJ Snake and Danish singer Mo, was the most heard single song, with more than 578 million streams as of Thursday.