He was made an Officer of the New Zealand Order of Merit, for his services to cricket.
Vettori, now 32 and living in Auckland, made his international debut as an 18-year-old against England in 1997.
He was the youngest player in New Zealand to play test cricket.
Vettori has 300 test wickets and 4000 test runs to his name.
He is thought to be one of the world's top left-arm spin bowlers, his citation said.
He recently retired as the captain of the Black Caps.
Speaking after the ceremony, Vettori said it was a privilege to be recognised by his country for doing something he loved.
"It feels like a real honour.
"The first time I knew about [the royal honour], it was just a real surprise. I couldn't get over it."
Wife Mary Vettori said: "I think he really deserves it. Over the years he's become a real role model for a lot of kids and it's great to see him honoured."
To which Vettori looked at her, surprised, and said, laughing: "Wow, that's nice."
