The Wall Street actor will be recognised for his achievements and contributions in the theatre community.
He will be honoured with the award by his wife Catherine Zeta-Jones at a gala dinner on April 16, 2012.
Douglas said: "My time at the O'Neill is one of the greatest influences on my life and career. For an artist, it is a place unique in the world. I am delighted to accept this award from an organisation which has helped shape American theatre."
O'Neill executive director Preston Whiteway praised Douglas for his "relationship to the O'Neill and to founder George White".
Last year, Douglas battled cancer after doctors discovered a tumour in his throat. In January, the actor announced that he had beaten cancer.
Watch a trailer for Michael Douglas's latest film Haywire below: