Prince Andrew made the announcement in New York City Hall during a three-day visit to the city to reinforce British support in the aftermath of the World Trade Center terror attacks.

We are very gratified by this but we see it as an award being given to all the people of New York City

Mayor Giuliani

Mr Giuliani said he was "humbled and gratified" by the honour but said he felt the award was "for everyone".

New York city's police commissioner, Bernard Kerik, and its fire commissioner, Thomas Von Essen, are also to be given honorary CBEs at Buckingham Palace later this year.

'Call me Rudy'

On Monday, the Duke read the full citation giving the reasons for the Mayor's honour, which said: "Rudolph Giuliani has been appointed an honorary Knight Commander of the Most Excellent Order of the British Empire for his outstanding help and support to the bereaved British families."

The Duke said Mr Kerik and Mr Von Essen were being recognised for their "remarkable dedication and professionalism" in "saving British lives and assisting the families of the British dead".

A bit of fantasy and honour does help us all get through these tough times

Local resident Robert Funk

He also touched on a personal note, saying that his former wife, Sarah Ferguson, had had an office on the 101st floor of the World Trade Center.

Mr Giuliani, as a US citizen, will not be able to call himself Sir Rudolph.

"Just call me Rudy," he said.

"Please convey to the Queen how humbled we are for this recognition," he added.

"I am sure I speak for the police commissioner and the fire commissioner when I say that this award, and these awards, are really for the actions of the people of our city.

"We are very gratified by this but we see it as an award being given to all the people of New York City."

He also thanked the British Government for being America's "most loyal friend" and "a great support" in such difficult times.

New Yorkers welcomed the knighthood, and Mr Giuliani received louder applause than the visiting prince.

"What he's doing at the moment means much more than a title," local resident Robert Funk told BBC News Online. "Although a bit of fantasy and honour does help us all get through these tough times."

Blair message

The Duke's announcement was accompanied by a message from Prime Minister Tony Blair to the three men.

Tessa Jowell is returning to NY this week

In it he praised the police and fire commissioners for their "dedication to duty, humanity and bravery".

He also extended his thanks to Mayor Giuliani and his colleagues for the sympathetic way they handled British families who lost loved ones in the tragedy.

Foreign Office officials believe the final number of British victims in New York could be around 100 while Mr Giuliani has estimated the overall total to be around 4,500.

Culture Secretary Tessa Jowell is due back in the Big Apple this week to attend the UKwithNY Festival, which is intended to promote the UK to US visitors, as well as back the British Tourist Authority in its efforts to boost Britain as a tourist destination.