Freeman, 73, who won an Academy Award for his work in boxing drama "Million Dollar Baby" and a Golden Globe for "Driving Miss Daisy", has played roles ranging from God to presidents in a 40-year career on both stage and screen.
Known for his mellow voice and calm demeanor, he was last seen playing former South African president Nelson Mandela in the 2009 movie "Invictus".
"Morgan Freeman is an American treasure," Sir Howard Stringer, Chair of the AFI Board of Trustees, said in a statement.
"Across decades, whether playing a prisoner, a president or God, he embodies a calm authority that demands respect for the character and for the art form. His gifts to the cultural record are also underscored by his unmistakable voice that echoes through the hearts and minds of movie lovers around the world."
Freeman will be presented with the award -- the AFI's highest honor -- at a gala dinner in June 2011 that will later be broadcast on television.
Freeman joins the likes of Al Pacino, Meryl Streep, Clint Eastwood, Gene Kelly and Alfred Hitchcock who are also among the 39 actors honored by the AFI since 1973.
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