The accolade caps a momentous 12 months for the Scot in which he won a second Wimbledon title, retained his Olympic crown in Rio and was named BBC Sports Personality of the Year for the third time.
The 29-year-old, who also became a father in February, finished the season as world number one.
Calls for Sir Andy to receive a knighthood have been growing all year and reached a peak after his remarkable end to the season. But earlier this year he played down talk of a possible knighthood, saying: “Obviously it is the highest honour you can get in this country. But I feel like I’m too young for something like that.”
Two weeks ago he became the first person to be named BBC Sports Personality of the Year for a third time and he is the first British tennis player to receive a knighthood or a damehood.
The sport’s only previous recipient was Sir Norman Brookes, an Australian who was knighted for public service long after the end of his career in 1939.
Sir Andy’s honour also recognises his charity work. He is involved with a number of charities, including Unicef, the WWF and Malaria No More.
In 2013 he helped organise the Rally Against Cancer at Queen’s Club with best friend Ross Hutchins following the latter’s diagnosis of Hodgkin’s lymphoma and then donated his prize money of more than £70,000 to the Royal Marsden Cancer Charity.
In September, he staged Andy Murray Live with other tennis stars in Glasgow and raised more than £300,000 for Unicef UK and Glasgow charity Young People’s Futures..
There is also recognition in the New Year honours list for other Scottish sporting stars, with rower Katherine Grainger being made a Dame and wheelchair tennis star Gordon Reid receiving an MBE.
Dr Grainger is Britain’s most decorated female Olympic athlete after winning Olympic silver at Rio 2016 and gold at London 2012, adding to her silver medals from Sydney in 2000, Athens in 2004 and Beijing in 2008. She also has six world championships titles in her collection.
The rower, who was born in Glasgow and has a PhD in the sentencing of homicide, receives a DBE for services to sport and charity.
Mr Reid ended 2016 as world number one following a year which saw him win grand slam singles titles at the Australian Open and Wimbledon, and doubles titles at the French Open and Wimbledon. At the Paralympics in Rio, he took singles gold and a silver medal in the doubles.
Jo Butterfield, who won gold in the F51 club throw final at the Paralympics in Rio, receives an MBE for services to field athletics.
Scots from a range of fields are also honoured, with the list including academics, business people, a lollipop lady and a glass blower.
John Park Campbell, chairman of Glenrath Farms Ltd in the Borders, receives a knighthood for services to farming and charitable service to entrepreneurship.
Former Lord Advocate the Rt Hon Frank Mulholland QC receives a CBE for services to law in Scotland while a CBE also goes to Professor Susan Deacon.
Prof Deacon, assistant principal of the University of Edinburgh and the first female chair of the Institute of Directors in Scotland, receives the honour for services to business, education and public service.
Michael Cavanagh, who was chairman of Commonwealth Games Scotland (CGS) and represented CGS on the Glasgow 2014 board, receives an OBE for services to sport and the Commonwealth Games movement.
Meanwhile, Surjit Singh Chowdhary, vice-president of the Central Gurdwara Singh Sabha in Glasgow, receives an MBE for services to the Sikh community and charity.
The list also includes a British Empire Medal (BEM) for Rhona Ritchie, who has been a lollipop lady for more than 40 years.
Mrs Ritchie, lollipop lady at Pumpherston and Uphall Station Primary School in West Lothian, receives the honour for services to education.
One of the oldest recipients, 94-year-old Janet Gillespie, receives a BEM for her charitable service, having spent more than 60 years volunteering for Poppy Scotland, beginning with selling poppies in 1952 and only retiring last year.
Eileen Callander, a caretaker and cleaner at Hightae Primary School near Lockerbie for 26 years, received the British Empire Medal for services to her community.
She said: “It was totally unexpected, a shock. I was shaking like a leaf. I told my husband he had better read it to make sure it was correct. I have no idea who nominated me but it was a lovely surprise.”
Two of Scotland’s most senior female police officers are among the members of the emergency services to be included in the honours list.
Kate Thomson, who retired as Assistant Chief Constable for Police Scotland earlier this year, and Detective Chief Superintendent Lesley Boal, head of public protection for the service, were given the Queen’s Police Medal.
Police Constable George Trayner was also awarded the police medal while the Queen’s Fire Service Medal was given to Ian Bell, watch manager of the Scottish Fire and Rescue Service, and John Alexander, head of service at the Scottish Ambulance Service, was honoured with the Queen’s Ambulance Service Medal.
Ms Thomson served in the police for 31 years, becoming the first woman to command one of the local policing divisions and the first to lead the force’s criminal investigation department.
During her career, she also pioneered work to support victims of crime and led a team of detectives investigating crimes of violence and abuse against women and children.
Ms Boal joined the force in 1987 and led the national child abuse investigation unit from its launch in October 2014, working to tackle child sexual exploitation, protect children from harm and investigate offenders.
Mr Trayner received his medal to recognise his work to develop the role of liaison officers within the police force while Mr Bell has risen through the ranks of the SFRS since 1989 and has taken command of many significant incidents.
Mr Alexander, who has been with the ambulance service for 31 years, has shown “exceptional devotion to duty” and played a leading role in many major public events.
David Mundell, Secretary of State for Scotland, said: “Scotland’s honours recipients are superb ambassadors for Scotland. They truly deserve their recognition today and I congratulate each and every one of them.”
First Minister Nicola Sturgeon said: “The Queen’s New Year honours list provides richly-deserved recognition for Scots who have shown outstanding service in their chosen fields and admirable dedication in their local communities.”