The sportsman began playing squash when he was just eight years old at the Hallamshire Tennis and Squash Club, where his father Hedley Matthew was manager for a number of years.
Throughout this year he has been ranked number one or two in the world and he brought home two gold medals from the Commonwealth Games in Delhi last month.
Lord Mayor of Sheffield, Coun Alan Law, said: "A Sheffield lad born and bred, Nick still lives and trains in the city. His sporting success at the Commonwealth Games and beyond is amazing and we are so proud of him."
Mr Matthew, 30, said: "Winning two gold medals in Delhi has been undoubtedly the highlight of my career so far. It's always nice to receive the recognition in your own sport, but to be honoured by your city is something extra special.
"I have always thought I've had an advantage on many other players by having the luxury of being able to be based in my home town since I turned professional in 1998. Sheffield has made this possible not only through its excellent facilities but also the support the city has given me throughout my career."