The 79-year-old Canadian author, who has written over 40 works of fiction including the famous book "The Handmaiden's Tale", received the Order of the Companions Award which is held by only 65 people at one time.
An "emotional" Margaret Atwood added to her long list of accolades on Friday as the Canadian author became a member of the Order of the Companions of Honour for her services to literature at a ceremony at Britain's Windsor Castle.
Dressed in a dark dress, a colourful scarf and red hat, the 79-year-old, who wrote the best-selling 1985 dystopian novel "The Handmaid's Tale", received the honour from Britain's Queen Elizabeth, 93.
"I got a bit emotional. You're really looking at a lot of history and I’m old enough to remember a lot of that history," British media quoted Atwood telling the PA Media news agency after the ceremony.
"Short-form, she was brilliant in the war ... When you see the Queen at her age and her schedule that she puts out, it’s an inspiration to everybody, you just keep going."
Atwood later posed for photos outside Windsor Castle.
Founded by King George V in 1917, the award is given to those who have made "a major contribution to the arts, science, medicine or government lasting over a long period of time" and there are 65 members at any one time, according to the official royal website.
Current members include actress Maggie Smith, former British Prime Minister John Major and Canadian historian Margaret MacMillan.
Atwood this month won the prestigious literary Booker Prize, in a rare joint double award with British author Bernardine Evaristo, for "The Testaments", the Canadian's hugely anticipated sequel to "The Handmaid's Tale".
Atwood, who has a long list of prizes and honorary degrees to her name, has written more than 40 books of fiction, essays and poetry.