In recognition of a filmmaking career that spans blockbuster fantasy epics, early cult horror films and award-winning documentaries, the director, 64, will be presented with the honour during the opening ceremony of this year's festival on 12 May.
Organisers said the award recognises a body of work that blends large-scale Hollywood productions with auteur filmmaking and technical innovation.
The director, widely known for The Lord of the Rings trilogy, joins a list of previous recipients that includes Agnès Varda, Jodie Foster, Meryl Streep, Robert De Niro and Tom Cruise.
Cannes confirmed the award as part of preparations for the 79th edition of the festival, which will run from 12 May to 23 May.
Announcing the honour, the Cannes Film Festival said the tribute celebrates Peter's filmmaking for combining blockbuster storytelling with artistic experimentation.
The festival said his work reflects "extraordinary artistic vision and technological audacity".
Jackson said: "To be honoured with an honorary Palme d'Or at Cannes is one of the greatest privileges of my career."
He added: "Cannes has been a meaningful part of my filmmaking journey. In 1988, I attended the Festival Marketplace with my first movie, Bad Taste, then in 2001 we screened a preview sequence from The Fellowship of the Ring, both of which were important milestones in my career."
"This festival has always celebrated bold, visionary cinema, and I'm incredibly grateful to the Festival de Cannes for being recognised among the filmmakers and the artists whose work continues to inspire me."
The filmmaker has had a longstanding association with the Cannes festival.
In May 2001 he presented 26 minutes of footage from The Lord of the Rings: The Fellowship of the Ring months before the film's global release.
The presentation was initially met with scepticism but helped build anticipation for what later became one of the most commercially successful fantasy franchises in cinema history.
Iris Knobloch, president of the Cannes Film Festival, said the organisation was proud to honour Peter's contribution to cinema.
She added the festival was celebrating a filmmaker of "boundless creativity who has brought prestige to the heroic fantasy genre".
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