He was given the prestigious award in Brisbane by Queensland University of Technology.
The Indian icon turned down the award two years ago, as a protest against Indian students being attacked in Australian universities.
Mr Buchchan’s snub caused tension between Canberra and Delhi.
But the actor now feels it is time to “accept the great honour”, saying that the attacks were one-off incidents that have now been involved.
In 2009, there were many attacks on Indian students in Melbourne and Sydney, which Delhi said were accompanied by racist abuse and often fuelled by drugs and alcohol.
The doctorate was given for Mr Buchchan’s “outstanding contribution to creative industries over several decades.
At the ceremony, the legend said that he hoped that relations between India and Australia will improve.
“Education helps us to strengthen and fortify convictions not to be swayed by preoccupations of caste and creed, race and religion,” he said.
“I do believe large numbers of Indian students seek education in Australia and I hope that continues to grow.”