Oscar-winning actor Kidman will be the 49th recipient and the first Australian to receive the award, which marks the highest honour for a career in film at the AFI.
The Moulin Rouge star will join a star-studded roster of previous recipients, including Streep, Tom Hanks and Robert De Niro.
Kidman was scheduled to be presented with the award in June 2023 but the ceremony was postponed indefinitely due to a writers' strike.
The 56-year-old, who is married to four-time Grammy winner Keith Urban, will receive her award during a gala tribute at the Dolby Theatre in Los Angeles on April 27.
Mamma Mia! star Streep, who received the 32nd AFI Life Achievement Award in 2004, will present the award.
Freeman, who won an Oscar for his role in Million Dollar Baby, was named a presenter during the ceremony, alongside Oscar-winner Witherspoon, for her role in Walk The Line, and British actor Watts, who starred in The Impossible.
AFI president and chief executive Bob Gazzale paid tribute to Kidman, highlighting her appeal and contribution to film.
"Nicole Kidman embodies the glamour and romance of Hollywood past - a true screen icon - but she is also a risk taker - and so each performance is something new and something profound," he said.
"And like all truly great artists - Nicole not only gives back - she drives culture forward with her commitment to amplifying the voices of female directors and producers."
Kidman has been nominated for five Academy Awards, winning the best actress Oscar in 2003 for her performance in The Hours alongside three-time Oscar winner Streep.
In 2006, Kidman was awarded Australia's highest honour, the Companion of the Order of Australia.
During her career, she has also won a Bafta, two Emmys, and six Golden Globe awards.
In 2017, she was honoured with the 70th Anniversary Prize at the Cannes Film Festival, becoming one of only eight people to ever receive the honour.
In addition to her distinguished acting career, Kidman has served as a Goodwill Ambassador for UN Women for nearly two decades and, along with her husband, has helped raise millions over the years for the Stanford Women's Cancer Programme.
