The singer-songwriter is one of 85 people from Northern Ireland who have been recognised for their achievements.
The Belfast-born musician, whose full name is George Ivan Morrison, will be known as Sir George. He described his new title as a "huge honour".
Some of the 69-year-old star's biggest hits include Brown Eyed Girl, Moondance and, fittingly, Here Comes the Night.
His knighthood has been granted for "services to the music industry and to tourism in Northern Ireland".
In a statement on Friday, Morrison said: "Throughout my career I have always preferred to let my music speak for me, and it is a huge honour to now have that body of work recognised in this way.
"I would like to take this opportunity to thank all the fans who have supported me on my musical journey."
Morrison was born into a working-class family in east Belfast in 1945 but his exceptional talent has made him a global recording star.
The Rock and Roll Hall of Fame describes him as "one of the greatest singers of all time".
The son of Harland and Wolff shipyard worker, he grew up in a small terraced house in Hyndford Street, in the shadow of the shipyard's famous cranes.
His father's extensive record collection exposed the younger Morrison to a huge range of American musicians, including Hank Williams, Ray Charles, and Muddy Waters.
Those early influences filtered into Morrison's own eclectic style which mixes soul, blues, jazz and country music with pop and rock.
As well as selling millions of records worldwide, he has won six Grammys and a Brit award for Outstanding Contribution to Music.
His relationship with stardom and the media has not always been comfortable. In 1993, he became the first living recipient not to attend his own induction ceremony at the Rock and Roll Hall of Fame.
However, more recently he has accepted other accolades in person, including honorary degrees from both of Northern Ireland's universities.
Last year, he was granted the freedom of his native city and celebrated the honour by playing a free concert at Belfast's Waterfront Hall.
In total, 53 men and 32 women from Northern Ireland have been honoured by the Queen for their achievements in a range of fields and for their contribution to public life.
The second highest honour, Companion of the Bath (CB) was given to the top civil servant at Stormont's Department for Social Development, William Haire, while the chief executive of Belfast Harbour Commissioners, Robert Adair, becomes a Commander of the British Empire (CBE).
Also honoured is one of Northern Ireland leading exponents of the Chinese lion dance, Yuk Shan Lui.
PSNI Assistant chief Constable Will Kerr receives an OBE.
Former East Antrim MP Roy Beggs is awarded an MBE, as is BBC news cameraman Peter Cooper, who recently retired after 40 years.
Other recipients include:

The Oxford director will replace Greg Clarke after the annual general meeting on 10 June, when league clubs will be asked to ratify the appointment.
Clarke said last year that he would leave the role he has held since 2010.
Lenagan, who is the chairman of rugby league side Wigan, has been on the Football League's board since 2013.
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Van Morrison has been given a knighthood in the Queen's Birthday Honours list.
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