The award, which celebrates the finest Welsh music, was created in 2011 by Radio 1 DJ Huw Stephens and festival promoter John Rostron.
Kids in Glass Houses, Cowbois Rhos Botwnnog and Islet are among nominees.
David Owens, one of the 100-strong jury who helped pick the shortlist, called it "gloriously diverse".
The winner will be picked by a panel of at least 10 music industry experts.
The prize will be awarded at a ceremony in Cardiff on the opening night of Swn Festival 2012, which runs over four days from 18-21 October.
The founders of the prize say it is open to all genres of music, and will recognise diversity and fine production.
Bright Light Bright Light - Make Me Believe in Hope
Cate Le Bon - CYRK
Cowbois Rhos Botwnnog - Draw Dros Y Mynydd
Exit_International - Black Junk
Future of the Left - The Plot Against Common Sense
Huw M - Gathering Dusk
Islet - Illuminated People
Jodie Marie - Mountain Echo
Kids in Glass Houses - In Gold Blood
Kutosis - Fanatical Love
Los Campesinos! - Hello Sadness
Truckers of Husk - Accelerated Learning
Mr Owens, arts correspondent at Media Wales, told BBC Radio Wales the list underlined the "great breadth of music that we have in Wales today".
"There's rock, there's indie, there's folk, there's electro-pop and there's actually a large dose of experimentation as well," he said.
"When I saw the shortlist I was tremendously excited about it.
"We've never seen such a vibrant music scene in Wales.
"There is literally so much going on."
Mr Owens said this year's list included newer acts as well as more established acts.
"You've got established names like Future of the Left, who are a Cardiff band who have been creating some brilliant, blistering, belligerent, uncompromising rock and roll for a few years now.
"But there's people like Islet, who are an incredibly experimental psych-rock band from south Wales, alongside pastoral folk artists like Huw M and Cowbois Rhos Botonwg from north Wales.
"This year the judges who will come up with the winner have such a difficult task."
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