Paine, who made a record 815 appearances for the Saints between 1957 and 1974, will act as an ambassador for the club both at home and abroad and will take on his new role from 1 January.
The 73-year-old, who lives in South Africa, will be presented with his new title by the family of ex-Southampton manager Ted Bates on New Year's Day before the game against Arsenal.
Chairman Nicola Cortese told Southampton's official website: "I can think of no one more deserving of this prestigious title than Terry Paine.
"Terry and I have remained in permanent contact since the takeover of the club in 2009 and he has always been very supportive of what we do here at Southampton.
"To me he is a real 'Mr Southampton' having dedicated many years of his life to our great club, so it is a pleasure to award him with the formal role his continued support deserves.
"Terry has great integrity, and commands respect and affection wherever he goes. I am sure he will fulfil his role as Honorary President with the enthusiasm and energy that epitomised his performances as a player."
Paine said: "It is a great honour for me to be named Honorary President of Southampton Football Club.
"I've been bursting with pride since Nicola offered me the role. Everyone has been coming up to me asking if I'm OK because I have been bounding around with a permanent smile on my face for the past week."
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