Culture Secretary Tessa Jowell said the award marks Bryson's contribution to literature.
"Bill Bryson is one of Britain's most popular and best-loved authors," she told the presentation ceremony in central London.
"Despite having been born and raised in the United States, he has become a true British institution. He has not only delighted the British public with his witty and insightful writing, but educated and informed them as well."
Bryson said it was "a great honor" to receive the award, which is honorary because he is not a British citizen.
A former journalist, Bryson is best known for "Notes on a Small Island." A 2003 poll of British readers chose the book about modern Britain as the work that best described British identity and the state of the nation.
Born in Des Moines, Iowa, Bryson first came to Britain in the early 1970s during a backpacking tour of Europe. He returned in 1975 and worked as a journalist until 1987, for both The Times of London and The Independent. After living in the United States for a time, he returned to Britain.
Bryson has also written on the history of the English language and science in "A Short History of Nearly Everything."
He is a commissioner for the preservation group English Heritage and was made Chancellor of Durham University in northern England in 2005, succeeding actor and director Peter Ustinov.