Minister for Justice Alan Shatter has posthumously awarded the Military Star Medal to Private Patrick Kelly in a special ceremony in Custume Barracks in Athlone.
Private Kelly, 35, died alongside trainee garda Gary Sheehan when soldiers and gardaí were attacked by the Provisional IRA.
They were taking part in an operation to rescue kidnapped businessman Don Tidey in Ballinamore, Co Leitrim in 1983.
There has been no conviction in connection with Pte Kelly's death.
The Military Star has historically been awarded posthumously to members of the Defence Forces who lost their lives overseas.
It is the first time the military honour has been awarded to a member who died on home soil.
Pte Kelly's eldest son David accepted the framed citation from the minister.
As part of the ceremony, the Minister inspected a guard of honour and laid a wreath in memory of Private Kelly.
One of Pte Kelly's other sons, Corporal Andrew Kelly, a serving member of the Defence Forces, was presented with the medal on behalf of the family.
Last year, David Kelly confronted presidential candidate Martin McGuinness on the campaign trail and accused him of being on the IRA Army Council at the time of his father's killing.
Mr McGuinness denied the allegations.
Speaking on RTÉ's News at One, David Kelly said today's ceremony "meant the world" to him and to his family.
He said: "It was such a special occasion for us. Our father died in horrific circumstances in 1983 in the service of the country. My mother, it turned her life upside down, she was totally grief stricken.
"Within a few years we all moved to London. After all of these years, his four sons have returned to Ireland and we're delighted to be back in our home country.
"This ceremony is the culmination of all of the anniversary masses we've attended and the local town park has been named in honour of my father.
"The awarding of the Military Star, which he richly deserves for his sacrifice, it means the world to us."
Mr Tidey described Pte Kelly's actions as a "supreme sacrifice" and said that the awarding of a Military Star Medal was "a lovely recognition of a man who did his duty bravely".
