Previous recipients of the city's highest honor include British actress Judi Dench, former British Prime Minister Winston Churchill, the late British Princess Diana and former South African President Nelson Mandela.
The award is presented to individuals who have made outstanding contributions to London life, the BBC said.
Caine, who will turn 80 next week, was recognized for his achievements in cinema. He has appeared in more than 100 movies, including "The Dark Knight Rises," "Inception," "The Italian Job," "Alfie" and "The IPCRESS File." He will be seen opposite Jesse Eisenberg and Morgan Freeman in the movie "Now You See Me" this summer.
The BBC said Friday the Freedom of the City of London ceremony was conducted by the Clerk of the Chamberlain's Court and coincided with the opening of an exhibit of family photographs and portraits of the actor on display at the Museum of London through July.
"Sir Michael Caine is one of London's most loved and recognizable characters. He was the first actor to bring an authentic London accent to the big screen, and, although Hollywood success made him an international star, he remains inextricably linked to his London roots," the BBC quoted Beverley Cook, Museum of London curator, as saying.