The star of such classics as "The Umbrellas of Cherbourg" and "Belle de Jour", who made her name in the 1960s playing aloof, alluring beauties, is one of three French people honoured by this year's Praemium Imperiale, which is backed by Japan's royal family.
Deneuve, 74, sparked a worldwide feminist backlash earlier this year by defending men's right to "hit on" women in the wake of the Harvey Weinstein scandal.
She later tried to row back on an open letter attacking the #MeToo movement she co-signed in the French daily Le Monde, insisting that there was not "anything good about harassment".
Every year five international artists are honoured with the Praemium Imperiale prize worth 15 million yen (117,000 euros).
The French Pritzker-winning architect Christian de Portzamparc, 74, was also honoured this year along with the 90-year-old Franco-Belgian surrealist artist Pierre Alechinsky, one of whose paintings now hangs in French President Emmanuel Macron's office.
Japanese artist Fujiko Nakaya, 85, famed for her fog sculptures which have misted up galleries across the world, and Italian conductor Ricardo Muti, 77, will also receive prizes from Prince Masahito, the younger brother of Emperor Akihito, at a ceremony in Tokyo on October 23.
A parallel prize for young artists went to Britain's Shakespeare Schools Foundation, which organises the world's largest youth drama festival.
Nearly 150 artists have been awarded the prize down the years including the late Swedish director Ingmar Bergman and US composer Leonard Bernstein.