He was bestowed the honour by Afghan President Ashraf Ghani after the inauguration of the landmark Afghan-India Friendship Dam.
"A true brotherhood is honoured. PM is awarded the Amir Amanullah Khan Award, Afghanistan's highest civilian honour," External Affairs Ministry spokesperson Vikas Swarup tweeted along with a photo.
During his 25 minute-long speech after inaugurating the dam, Modi also invoked Chisht-born Sufi saint Khwaja Moinuddin Chishti who settled down in Ajmer and is venerated by thousands of people visiting his shrine.
"Khwaja Moiunuddin Chishti, the first of the Chishti saints in India, said that human beings must have the affection of the sun, the generosity of the river and the hospitality of the earth. "He not only had the magnificent landscape of his ancestral land in mind, he could also be describing the Afghan people.
So, when I came to Kabul in December, in the warmth of your welcome, I saw the kindness of your heart," said Modi in Chisht-e-Sharif in western Herat neighbouring Iran.
At the close of the speech, the Prime Minister also wished the people of Afghanistan and all Muslims across the world for the Holy Month of Ramzan.