Loach has a long association with the city and has worked with some of its most famous actors, including Ricky Tomlinson and Ian Hart.
He also made a documentary, called The Flickering Flame, about a strike at Liverpool Docks in the mid-1990s.
A university spokesman said Loach was being recognised for "his distinctive and humane artistic vision".
The director, who was born in Nuneaton, Warwickshire and lives in Bath, came to prominence in 1969 with coming-of-age film Kes.
Since then, he has teamed up with many Liverpool actors, including Tomlinson in Raining Stones; Hart in Land and Freedom; Crissy Rock in Ladybird, Ladybird; and John Bishop and Mark Womack in Route Irish.
The Flickering Flame, which Loach made in 1996, documented a dispute between a group of dockers and their employers. The story was also made into a Channel 4 film, scripted by the dockers with help from writers Jimmy McGovern and Irvine Welsh.
University vice-chancellor Prof Gerald Pillay said the director's work gave a voice "to people in the most desperate of situations".
He said Loach's work "brings to our attention the plight of the â€‹disinherited and his unwavering dedication to â€‹presenting the truth to his audience - no matter how difficult that may be â€‹ - inspires us all".
Loach will be made a Doctor of Humane Letters at a ceremony at the Liverpool Metropolitan Cathedral on 22 January.
Source: Crisis/BBC
Acclaimed film director Ken Loach is to be awarded an honorary doctorate from Liverpool Hope University.