Williams, 83, who has composed for films like "Star Wars", "ET", "Jaws" and "Schindler's List", will receive the award at a ceremony on 9 June, 2016, reported BBC.
It marks the first time the honour has been given to a composer in 44 years.
"John Williams has written the soundtrack to our lives. Note by note, through chord and chorus, his genius for marrying music with movies has elevated the art form to symphonic levels and inspired generations of audiences to be enriched by the magic of the movies," chairman of the AFI board of trustees, Howard Stringer said.
He is also scoring "Star Wars: The Force Awakens", which opens in December.
The institute has typically honoured high-profile actors and directors with the award, including Alfred Hitchcock, Elizabeth Taylor, Martin Scorsese, Meryl Streep and last year's honouree, Steve Martin.
The inaugural award was given to John Ford in 1973.