Michael Novak, a scholar known for formulating a theological defense of capitalism, won a prize yesterday of nearly $1 million established by one of capitalism's most successful practitioners.

Mr. Novak, whose religious arguments linking democracy and capitalism influenced opinion in Eastern Europe and are echoed in Pope John Paul II's writings, was named the winner of the 1994 Templeton Prize for Progress in Religion.

The prize was created 22 years ago by Sir John M. Templeton, an American-born British subject who is widely considered the dean of global investing, to honor a person judged to have advanced the world's understanding of religion.

Mr. Novak, a 60-year-old Roman Catholic who once studied for the priesthood, was a proponent of many of the changes in Catholic teachings and practices introduced by the Second Vatican Council.

He was an outspoken opponent of the war in Vietnam while teaching religious studies at Stanford University in the mid-1960s. Dissatisfied with the opposition to capitalism he encountered in politically active religious circles, he wrote "The Spirit of Democratic Capitalism" in 1982.