He will join some big names including Indiana Pacers star Reggie Miller and Serbian great Predrag Stojakovic.
Penney is the second New Zealander to be inducted after current Tall Blacks coach Pero Cameron was honoured in 2017.
Seven players and one coach are being formally recognised for their contributions to basketball this year and will take part in an enshrinement ceremony in Singapore in September.
Penney is being honoured for serving the Tall Blacks with distinction at two Olympic Games and four World Cups.
The shooting guard played for New Zealand from 1999 to 2014, captaining his nation in 21 of the 179 games he played.
One of only three New Zealanders to feature in the NBA, Penney made his New Zealand debut as an 18-year-old and quickly cemented himself in the side during a golden run for the national team.
During that time, the Tall Blacks played at the 2000 Sydney Olympics, finished fourth at the 2002 world championships and played at the 2004 Athens Olympics.
The team also featured at the 2006, 2010 and 2014 world cups, the last one in Spain proving to be Penney’s swansong at the top level.
"We took enormous pride in carrying the Kiwi flag around the world.
“We shared some amazing experiences over the years and I think I was truly blessed to play with a couple of generations of really good New Zealand basketball players — and to be a part of building a foundation for future New Zealand basketball success.
"This honour brings back a boat load of incredible memories on the global stage with great people."
Joining Penney on the list of inductees is former Olympic and World Cup winner Miller who is especially revered for his NBA contributions across an amazing 18 seasons in the league where he tallied 25,000 points, helped by 2560 three-pointers and five NBA All-Star appearances.
Stojakovic, often referred to simply as Peja, won the Fiba World Cup gold medal in 2002 with Yugoslavia, as well as a FIBA EuroBasket title in 2001 when he was crowned MVP.
Also an Olympian, Stojakovic attained plenty of success at club level, most notably winning an NBA Championship in 2011 with Dallas Mavericks. A three-time NBA All-Star, he also won the Three-Point Contest twice.
Other inductees are Latvian women’s great Skaidrite Smildzina-Budovska, three-time Chinese Olympian Miao Lijie, Croatian ace Danira Nakic-Bilic, Central African Republic guard Romain Sato, and American coach Dan Peterson.
The Fiba Hall of Fame was created in 2007 and has already featured 184 inductees from 45 countries and all five continents to date.
The Hall of Fame is based in the Patrick Baumann House of Basketball in Mies, Switzerland.
