Vinod Khanna's wife Kavita was accompanied by son and actor Akshaye Khanna at the Vigyan Bhawan in Delhi to receive the honour.
Ahead of the ceremony, Akshaye said: "It is very humbling as a son to be receiving this on his behalf. It's a very proud and emotional moment for all of us."
Kavita said: "It's such a happy occasion and time of great pride for us, for the family, for all his fans and for everyone who loves him. There's also a sense of his not being here to receive it.
"But I am so happy Akshay is going to receive it on his behalf... There can be no one better than Akshay to receive this on his behalf."
The Dadasaheb Phalke Award was this year among the select 11 categories of honours distributed by President Ram Nath Kovind. The rest were given out by Information and Broadcasting Minister Smriti Irani and Minister of State for Information and Broadcasting Rajyavardhan Singh Rathore.
Vinod Khanna died last year following prolonged illness. He was 70.
Honouring him with the Dadasaheb Phalke Award was a collective decision of the 65th National Film Awards jury, chaired by filmmaker Shekhar Kapur.
The actor had starred in some of the biggest Bollywood hits like "Mere Apne", "Insaaf", "Parvarish Muqaddar Ka Sikandar", "Qurbani", "Dayavaan", "Mera Gaon Mera Desh", "Chandni", "The Burning Train" and "Amar, Akbar, Anthony".
He also pursued a political career as the Bharatiya Janata Party (BJP) member of the Lok Sabha from Punjab's Gurdaspur constituency and had also been a Union Minister in the Atal Bihari Vajpayee government.