Salah Farah got the award posthumously after being shot dead by militants in north-eastern Kenya in December.
He led a group of Muslim passengers who refused to split from Christians when ordered to do so by the jihadis who had stormed his bus.
Kenyan President Uhuru Kenyatta said he was granted the Order Of The Grand Warrior "for his act of courage".
What is Al Shabab?
- Formed in 2006 in Somalia
- Means "The Youth" in Arabic
- Between 7,000 and 9,000 fighters
- In 2012 it pledged allegiance to Al-Qaeda
- Behind Nairobi's Westgate shopping centre attack
Mr Farah, a teacher, had "refused to be divided by terrorism," the president said during his state of the union address in parliament.
Militants from the Somalia-based al-Shabab group stormed the bus, which was carrying about 60 passengers, as it travelled between the capital, Nairobi, to the town of Mandera.
They gave up their attempts to kill the Christian passengers as the Muslims were refusing to co-operate.
Three people died during the incident, one of whom was Mr Farah.