The tennis star could not hold back his emotions during the ceremony yesterday as he spoke of how proud he was to receive the award in his home town.
Pupils and guests at Dunblane High School applauded as Murray struggled to finish a short speech where he thanked Stirling Council for bestowing the honour and his family and girlfriend for supporting him.
The double grand slam winner's arrival at the school's assembly hall was heralded by a piper and he was given a standing ovation as he took his place on the stage with Stirling Council Leader Johanna Boyd and Provost Mike Robbins.
Murray said: "Everyone knows how proud I am of where I come from, so this is a huge honour.
"Moving away was one of the sacrifices I had to make for my job and every time I come back it's quite emotional.
"It's been very emotional today - I wasn't in tears when I won Wimbledon."
The award dates back to medieval times and confers the right to trade freely in the market, pass through Stirling without tolls and free rights to graze his livestock within the city boundaries.
The Olympic champion, who was accompanied to the ceremony by his girlfriend Kim Sears and mother Judy Murray, later joked that he might try to bring a few sheep to town later that night.
After the ceremony the 26- year-old spoke of his journey from being a schoolboy practising at the local sports centre to becoming the first British man to win a major tennis title since 1936.
He said: "I don't get the chance to come back that often and I don't get the chance to see my family as much as I would like.
"Good tennis players don't really come from Scotland, but anything can happen if you believe, dream and work hard."
Sixth-year pupil Alex McRae said: "Everyone here is behind Andy at all his events so it was brilliant to meet him. There are swimmers, footballers and tennis players in the school and I think everyone has been motivated."
Mrs Boyd said that it was a "great privilege" to formally recognise Murray's sporting achievements.
Murray also visited Wallace High School in Stirling, where he fielded dozens of questions from young people around the UK.
The event, hosted by Question of Sport presenter Sue Barker, was streamed live on the internet by the BBC.
Asked whether he ever just wants to stay in bed and eat donuts, he replied: "I do that sometimes. Yoghurts and ice cream instead of donuts though."
The tennis player later received an honorary degree from Stirling University at another ceremony in the city.