The peer received the medal during a ceremony at the French embassy in London for devoting "his entire career" to serving the UK and EU.
"Lord Mandelson has been a long-time friend of France," a spokesman said.
Tory Andrew Bridgen accused the peer of having "a bad dose of Europhilia".
Lord Mandelson, credited as one of the co-creators of New Labour, held a number of Cabinet positions under Labour prime ministers Tony Blair and Gordon Brown and was a Britain Stronger in Europe director during last year's EU referendum campaign.
He was also European Commissioner for Trade between 2004 and 2008.
During the referendum he attacked the case to leave the EU as a "fantasy" and accused Labour leader Jeremy Corbyn of sabotaging the campaign to keep the UK in the 28 nation bloc.
French ambassador Sylvie Bermann presented the former Hartlepool MP with the medal, on behalf of the French president, during a ceremony at the ambassador's official residence in London on Wednesday.
"Lord Peter Mandelson was made Officier de l'Ordre national de la Legion d'honneur for his entire career devoted to serving the United Kingdom and the European Union, be it through his active involvement in world affairs or through his work updating policies for tomorrow," he said.
"Lord Peter Mandelson has been a long-time friend of France."
The Legion d'honneur, created by  Napoleon Bonaparte, is conferred for gallantry in action or 20 years of distinguished military or civilian service in peacetime.
Numerous British politicians have also been decorated recently, including the last British governor of Hong Kong, former Conservative cabinet minister Lord Patten, former Conservative attorney general Dominic Grieve and Conservative MP Sir Edward Leigh.
Speaking to the Daily Mail, Conservative MP Andrew Bridgen said of Lord Mandelson's award: "The French seem to have a habit of giving out medals for battles they have lost."
He added that Brexit was "the best remedy" for Lord Mandelson's "bad dose of Europhilia".
Former Labour cabinet minister Lord Mandelson - one of the UK's key campaigners against Brexit during the referendum - has received France's highest accolade, the Legion d'honneur.