The Australian icon was conferred with the Japanese Order of the Rising Sun, in recognition of her contribution to music in Japan, as well as fostering relations between Japan and Australia.
An official conferral ceremony will be held at the Japanese embassy in Canberra once COVID-19 travel restrictions are eased.
The award is the third-highest honour bestowed by the Japanese government and is usually reserved for people who have made distinguished achievements.
Newton-John said she was surprised by the award.
"As an Australian, I feel very honoured," she said in a video message.
The singer has visited Japan more than 10 times, her first being in 1972, and has performed in locations around the country.
She was the first foreign female singer to hold a memorial concert in Fukushima following the 2011 earthquake, tsunami and nuclear disaster.
Japan's ambassador to Australia Yamagami Shingo said Newton-John had a large legacy in the country.
"Not only have the famous tunes been major hits in Japan, they have had a huge impact on Japan's pop music scene and its development," he said.