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This is the highest honour in the awards system, with just 20 living New Zealanders able to be full members of the order at a time.
Hotere Foundation Trust chairwoman Judith Ablett-Kerr released a statement from Hotere, who suffered a debilitating stroke in 2001.
"He spoke of our nation . . . relying on citizens from all walks of life stepping forward, helping others, seeking new ways of doing things, and reaching for their dreams. He also spoke of enriching the lives of others. I am deeply moved," Hotere said.
Ms Ablett-Kerr said Hotere's work reflected his intense spiritual interest in humanity and the environment. The honour was a fitting end to the year he celebrated his 80th birthday with exhibitions throughout the country to mark a career spanning more than 50 years.
"This honour is the ultimate endorsement.
"Through his art, Ralph has remained outspoken about issues that trouble the world and that outspokenness continues even today, some 10 years after he suffered a debilitating stroke."
She had known Hotere for more than 10 years. He had sought her assistance to recover land at Observation Point, Port Chalmers, which was lost through port development.
"I obviously knew of his reputation as one of New Zealand's greatest artists prior to this request and felt privileged to try to assist him, although it was an unusual case for me to take on at that time.
"We were all delighted with the ultimate outcome which was the creation, in conjunction with the Port Otago Authority, of the Hotere Sculpture Garden Oputae at Observation Point.
"The garden is situated on the last plot of land at Observation Point, next to the site of Ralph's first Dunedin studio."
Gifted to the Hotere Foundation Trust, the garden was a "mecca" for art lovers and tourists.
Hotere developed the trust as a vehicle through which the public could access his private collection, Ms Ablett-Kerr said.
"He has persevered with this project and his art despite suffering a debilitating stroke in 2001 and continues to be a social commentator through his work."
This month he completed an artwork for his Christchurch printer, Marion Maguire, to show support for the city.
The citation for the honour said that as a painter, sculptor and collaborative artist, Hotere's works were a reaction to social and environmental issues.
His work was dominated by black, both in colour and in the artworks' titles and made extensive use of words, often quoting well-known poets and his conversations with them.
His artwork had dealt with key New Zealand historic events such as the Springbok tour, the Rainbow Warrior sinking, and the Aramoana massacre.
Mediums included canvas, roofing iron, gold leaf and glass.
"Mr Hotere's work is represented in all major public and private collections in New Zealand and internationally," the citation said.