Kuno, a Belgian Shepherd Malinois, turned the tide during an assault on a compound in 2019 when the assault force he was in was pinned down under grenade and machine-gun fire.
The then-four-year-old dog suffered several bullet wounds to his back legs during the siege, leaving him in need of several operations and eventually the amputation of part of one paw.
He has since retired and has been fitted with a pair of prosthetic limbs.
"I've had the privilege of meeting him on several occasions and every time I see him, you look into his eyes and you can see his intelligence, his determination to please," chief defence veterinary and rehoming officer Colonel Mark Morrison told the PA news agency.
"He's interested in everything and he's just an amazing character. He is both sociable and businesslike ... and you don't get that all the time. A really special dog."
The PDSA Dickin Medal, the animal equivalent of the Victoria Cross, was awarded to Kuno on Tuesday during a virtual presentation.
He joins a select group of 72 animals who have received the honour, including dogs, horses, pigeons and a cat.
"They're really important, in some niche roles they are absolutely central," Colonel Morrison said.
"They provide the ability to detect explosives or other threat substances. In other instances what we value is their ability to protect. Their physical presence is enough in some respects.
"Of course, they're great companions and their loyalty makes all the difference."