President Jose Ramos Horta presented director Robert Connolly and producer John Maynard with the medal at a ceremony in the capital city Dili on Sunday as part of the fledgling nation's 10th anniversary celebrations.
The Presidential Medal of Merit is a special honour that is only awarded to those who have made a great contribution to the country.
The awards, which were also attended by the film's star Anthony LaPaglia, followed seven nights of screenings of Balibo, which has been dubbed into the Tetun language of the local population.
The film, about six Australian journalists killed in East Timor in 1975 by invading Indonesian soldiers, has been shown around the country on an inflatable screen, accompanied by Maynard and actor Tom Wright.
Maynard said it was a humbling experience to be able to show thousands of people in East Timor the movie, which is the first feature film made in the country.
"This was a once in a lifetime experience for us, as well as the Timorese audiences who were, for the very first time, seeing a feature film dubbed in their own language about events in Timor," Maynard said.
"Men, women and children were moved to tears as they sat on the ground and watched what was for many, part of a hidden history and for some, a painful memory."
Balibo is currently screening around Australia.
It has taken $643,093 so far at the box office but will expand to more than 50 screens from mid September.
