Rupert Price Hallowes was awarded the highest decoration for valour in the face of the enemy for his actions during the Battle of Hooge in Belgium.
He died on 30 September 1915 at the age of 34 after he was wounded when a bomb was dropped on his trench.
A commemorative paving stone was unveiled in Memorial Park, Redhill to mark the centenary of the battle.
The citation in The London Gazette in November 1915 said that 2nd Lt Hallowes showed "the greatest bravery and untiring energy" during the battle, which lasted from  25 to 30 September.
As well as the VC awarded posthumously, 2nd Lt Hallowes, who served with the 4th Battalion The Duke of Cambridge's Own (Middlesex Regiment), was the holder of the Military Cross.
He is buried at the Bedford House Cemetery in West-Vlaanderen, Belgium.
"Our borough is proud to commemorate 2nd Lt Hallowes's heroic actions and remember all those who served during the First World War, especially those who made the ultimate sacrifice for freedom," said Mayor Joan Spiers.
"It is important that such acts of courage and bravery are not forgotten by following generations and are acknowledged by the communities that these soldiers were fighting for."
The memorial stone is one of 469 given to local authorities to honour First World War VC recipients in the towns where they were born.
A memorial has been unveiled in honour of a World War One hero from Surrey who was awarded the Victoria Cross (VC).