Wootton Bassett is to be the first town in more than 100 years granted the title "Royal" in recognition of its parades for fallen soldiers, David Cameron has announced.
The Prime Minister confirmed that troop repatriations would no longer happen via the Wiltshire town from September due to the closure of a nearby RAF base.
But he said the Queen had agreed to the tribute as "an enduring symbol of the nation's admiration and our gratitude to the people of that town".
"Their deeply moving and dignified demonstrations of respect and mourning have shown the deep bond between the public and our Armed Forces," Mr Cameron told the Commons.
The Prime Minister made the announcement after making his regular tribute at the start of question time to the most recent military casualty in Afghanistan and said: "The town will become Royal Wootton Bassett later this year in a move I believe will be welcomed right across our country."
In a written ministerial statement, Defence Secretary Liam Fox confirmed that repatriation ceremonies for those killed in operational theatres will move from RAF Lyneham to RAF Brize Norton.
"I would like to thank RAF Lyneham for their excellent work in supporting the important task of repatriation ceremonies," Dr Fox said. "I am certain that RAF Brize Norton will maintain the standard of solemnity, dignity and respect to our service personnel killed on operations as shown by the personnel at RAF Lyneham."
He went on: "I would also like to record publicly my thanks to the people of Wootton Bassett who have chosen to pay their respects in a unique and special way. It is such spontaneous public support that captures the spirit of the British people, and I am very grateful for those who have participated.
"Such gestures do not go unnoticed by those deployed on operations."
Mary Champion, Mayor of Wootton Bassett, said: "This is a great honour for our community as the repatriations move away from Wootton Bassett. Whilst we have never sought recognition for our simple act of respect, I am certain that this will serve to reinforce the pride and gratitude we feel for the members of our armed services who will always be in our thoughts."
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