Sasha, a four-year-old yellow Labrador, who was assigned to Lance Corporal Kenneth Rowe of West Moor, Newcastle, will be honoured with the PDSA's Dickin Medal, which the charity said was the animal version of the Victoria Cross.
She was credited with saving the lives of scores of soldiers and local civilians after sniffing out Improvised Explosive Devices (IEDs), mortars and hidden weaponry, having made 15 confirmed finds.
Her calm presence and wagging tale was also said to have been a reassuring sight for British Army personnel serving in Afghanistan.
The PDSA said Sasha was only the 65th animal to be awarded the Dickin Medal since it was instituted in 1943. It is the highest award that an animal can receive while serving in military conflict.
Sasha was deployed with handlers from the Royal Army Veterinary Corps, attached to the 2nd Battalion The Parachute Regiment.
With her handler, she was sent in advance of patrols to find safe routes for soldiers, and her aim was to find weapons and IEDs.
The PDSA said: "Sasha's determination to search and push forward - despite gruelling conditions and relentless Taliban attacks - was a morale boost to the soldiers who entrusted their lives to her weapon-finding capability.
"On one occasion recalled by regimental colleagues, Sasha was searching a building in Garmsir when she detected two mortars and a large quantity of weaponry, including explosives and mines. This find alone undoubtedly saved the lives of many soldiers and civilians."
When she was assigned to L/Cpl Rowe in May 2008 the team were considered the best in the Kandahar region.
She died alongside her handler on July 24, 2008 when their routine patrol was ambushed and they were killed in a rocket-propelled grenade attack.
An inquest heard that 24-year-old L/Cpl Rowe died the day after he was due to return home as he wanted to stay on and complete a planned operation because he was concerned about a lack of cover for comrades.
PDSA Director General Jan McLoughlin said: "We are extremely proud to be awarding a posthumous PDSA Dickin Medal to Military Working Dog Sasha, which is the highest award any animal can receive for lifesaving bravery in military conflict."