She is now set to join the likes of Jarvis Cocker, Sean Bean, Michael Palin and Jessica Ennis on the “walk of fame.”
Dame Margaret was born in Sheffield in 1939 to John and Kathleen Drabble, whose elder daughter is the writer A S Byatt.
She acted with the Royal Shakespeare Company in Stratford-upon-Avon before her first novel, A Summer Birdcage, was published in 1963.
A further 16 highly-acclaimed novels were published over the next 43 years, including The Millstone and The Seven Sisters.
She is also the author of biographies of Arnold Bennett and Angus Wilson, and is editor of the fifth and sixth editions of The Oxford Companion to English Literature.
A spokesman for Sheffield Council said: “Launched in 2004, the Sheffield Legends are nominated by local people and chosen by an independent selection board representing various sectors within the city.
“The celebrities are from very different walks of life, but all have a strong connection with Sheffield, either being born here or having lived here for many years.”