Dylan, 72, will emulate Paul McCartney as one of only a handful of foreigners to receive the Legion d'Honneur.
The veteran US singer is in the French capital this week for three nights of concerts.
He was nominated for the award by avowed Dylan fan Aurelie Filippetti, France's minister of culture.
The nomination was blocked temporarily earlier this year after army general Jean-Louis Georgelin, the Grand Chancellor of the Legion, voiced reservations about Dylan's use of cannabis and anti-war politics.
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Former Beatle McCartney received the Legion d'Honneur in September 2012.
Established by Napoleon, the Order of the Legion d'Honneur honours individuals who have served France in various ways.
Foreigners do not formally become members of the order but are decorated with the insignia of the legion in recognition of service to France or work that is deemed to uphold the ideals of the country.