Sarbi became separated from her handler during an attack in 2008 while serving with Australian troops in Afghanistan.
Sarbi was found 14 months after she went missing at an isolated patrol base.
"An American saw an Afghan with this particular dog and thought 'that looks a bit like the Australian dog,' so the microchip was tested and yes indeed it was Sarbi," Australian War Memorial spokeswoman Carol Cartwright said.
Cartwright says it is only the second time the award has been presented to an animal for service in war. Murphy, a donkey that served in World War I, was honored on behalf of all the donkeys in that war.
"The award is an RSPCA award and it has gone to dogs that have saved people in house fires and heart attacks and things like that," Cartwright told the Australian Broadcasting Corp.
Celebrity Families of 2014 [PHOTOS]