In a decree read by the presidential military secretary, Suharto was named among 10 honorees newly dubbed national heroes, joining a list of more than 200 people that includes the first democratically elected president, as well as prominent women's rights advocates, Islamic scholars and independence activists.
Sitting President Prabowo Subianto, Suharto's former son-in-law, presided over Monday's National Hero Day ceremony.
In response to outcry over the plan to include Suharto, Prabowo's office had insisted he has the right to bestow the title upon whomever he chooses.
Former president Suharto, who died in 2008 aged 86, ruled Indonesia with an iron fist for more than three decades after grabbing power in 1967 following a failed military coup.
His rule was marred by allegations of corruption and human rights abuses, including violent crackdowns on political dissent.
Last week, around 500 civil society members, activists and academics published a letter sent to Prabowo requesting he not proceed with the hero designation.
The letter said awarding Suharto the title was a betrayal of his victims and of democratic values, and constituted a dangerous distortion of history.
Prabowo himself has faced a series of violent protests since sweeping to electoral victory last year, mainly sparked by discontent over economic inequality and lavish perks for lawmakers.
The Commission for the Disappeared and Victims of Violence (Kontras), a local rights group, said designating Suharto a national hero was immoral and helped to normalise impunity.
