The 55-year-old, who now lives in Canada, was handed the Dresden Prize for her support of Unesco and children wounded in war, the organisers said.
She was also honoured for speaking out publicly against violence and hatred. She received 10,000 euros (£8,800).
Ms Phuc was nine-years-old in 1972 when a South Vietnamese plane dropped napalm bombs on her village in the belief it harboured North Vietnamese troops.
The image of her running down the road in tears, naked and severely burned, was captured by Vietnamese-American Associated Press photographer Nick Ut, who won a Pulitzer Prize for the photo in 1973.
In 2015, Ms Phuc travelled from Canada to Miami to visit a dermatologist who specialises in laser treatments for burn patients, in the hopes it would relieve the aches and pains caused by the burns.
Past recipients of the Dresden Prize include former Soviet leader Mikhail Gorbachev and American civil rights activist Tommie Smith.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies