"We have decided to name Room No 4 after Aruna," KEM hospital dean Dr Avinash Supe told PTI.
"The room will also be used for the public and staff," he added.
Shanbaug, a nurse at the hospital, existed comatose in the room after being subjected to a brutal sexual assault in 1973 by a ward boy, who tried to throttle her with a dog chain, leaving her in a permanently vegetative state.
They put flowers and cut a cake. Had she lived three weeks more, she would be celebrating her 68th birthday.
Also Read
A commemorative programme was also organised in the hospital auditorium by the nursing staff.
The demand for renaming the room was made by the nursing staff shortly after Shanbaug's death.
Later, Chief Minister Devendra Fadnavis announced that the Thane Nursing Training College would also be renamed after her.
A Marathi biography on Shanbaug, 'Vyatha Arunachi' (Aruna's Agony), written by senior journalist Neha Purav, was released here this afternoon.
A Mumbai journalist last week traced Sohanlal Valmiki, the former hospital sweeper, who perpetrated the crime on Shanbaug to a village in Ghaziabad district of Uttar Pradesh.