Mel Nurse, 78,  played 250 times for Swansea City in two spells from 1955.
He was also credited with helping to save the club from financial ruin after leading a consortium to buy it in 2002.
Swansea council agreed the honour on Thursday, with Mr Nurse following in the footsteps of John Charles, who was born in the same Cwmdu street as him and was awarded the honour in 2002.
Leader Rob Stewart described him as " a wonderful ambassador", adding: "quite rightly he is known as 'Mr Swansea'."
He also credited Mr Nurse, a former centre-half who won 12 Wales caps, with helping to steer the club through tough times and attain its current lofty position.
"After his playing career was over he built up a property empire locally and it was his financial resources and business acumen which helped save Swansea City FC when the crunch came in 2002.
"Now the Swans are in the Premier League and are watched by hundreds of millions of football fans around the world every week," he added.
Mr Nurse follows fellow Welsh football international Charles, former US president Jimmy Carter and former Archbishop of Canterbury, Dr Rowan Williams in being given the honour.
A football legend known as "Mr Swansea" for his work on and off the pitch has been given the freedom of the city.