Sir Peter Blake received Liverpool's Citizen of Honour at a ceremony at the city's Liver building.
The 84-year-old also gave Mersey ferry Snowdrop a dazzle ship makeover entitled Everybody Razzle Dazzle.
Sir Peter, who was born in Kent, said he hopes Liverpool people will accept him as an "honorary Scouser".
Lord Mayor of Liverpool Roz Gladden said: "Sir Peter has helped shape Liverpool's cultural significance on the global stage for more than five decades - from Sgt Pepper to Everybody Razzle Dazzle.
"His work with The Beatles was one of the seminal moments in popular art in the 20th Century and 50 years on still resonates around the world as we will see with our 50 Summers of Love programme."
She said he had continued to make outstanding contributions to the cultural life of the city "underlining the depth of feeling he has for Liverpool and the city has for him".
Sir Peter said: "As well as my music links with the city, I'm proud of my association with Liverpool Biennial and Tate Liverpool and hope to continue my relationship with the city."
He said he treasures "the warmth and good humour of the people of Liverpool".
Citizen of Honour awards were introduced in 2008 to recognise individuals who have enriched the image of Liverpool and its citizens.
Recent recipients include James Barton, founder of the nightclub brand Cream, and Harry Potter and Fantastic Beasts film director David Yates.
The Snowdrop ferry was due to be returned to its original paintwork at the end of 2016 but it has been extended until 2019.

The man dialled two taxi firms from the landline in the house at Wodecroft Road, Luton, but hung up after he was asked for his phone number.
Bedfordshire Police asked anyone who recognised the man's voice to contact them.
A flat-screen television and other electrical items were stolen from the house.
The calls were made in the early hours of Saturday 25 October using a cordless telephone, which was then left on a table in the garden, police said.
The man called two Luton taxi firms which were both dealt with by the same control office.
In the first call, the suspect was asked to leave his landline number, but said he did not know it.
He was then asked to leave his mobile number and he started to, but then stopped, claiming he did not know it.
Police said he then made a second call and got through to the same controller, who explained the office handled calls for more than one taxi firm.
The force hopes the suspect, who almost revealed his mobile phone number, can be identified from the recordings, which were made automatically.
Det Con Scott Hannam said: "We are keen to identify the man as we believe he may have important information which could assist our investigation.
"I would urge anyone who recognises his voice, or for the man himself, to contact police.
"I am also keen to hear from anyone who has any information or saw a large television being carried around this area on the night in question."

The governing body took the decision to switch the club's membership to OK Bulls Ltd after Khan's group bought the club from the administrators in August.
Bradford's membership was suspended in June when they entered administration.
"The board's decision closes the door on much of the uncertainty that has surrounded the Bulls in recent months," RFL director Blake Solly said.
"The club's new owners have co-operated fully with the RFL throughout this necessarily extensive process and we look forward to working with Mr Khan and Mr Sutcliffe in the months and years ahead.
"The decision to grant membership is an important step that will help the board to determine which competition Bradford Bulls will compete in from 2013."
No decision has yet been reached on what division the Bulls will compete in next season but an announcement is expected by the end of the week on how that decision will be reached.
Bradford finished ninth in Super League this season, three points outside the play-offs, having been deducted six points for entering administration.
The artist who created the album cover for The Beatles' Sgt Pepper album has been given a top honour in the band's home city.
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Police have released recordings of a suspected burglar phoning for a taxi from the house he had just broken into.
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The takeover of Bradford Bulls by Omar Khan's consortium has been ratified by the Rugby Football League.