Kutaragi joined Sony in 1975 as an engineer, rising through the ranks to become chairman and chief executive of Sony Computer Entertainment.
Following the runaway success of the original PlayStation, launched in 1994, Kutaragi gained the title 'Father of the PlayStation'.
Kutaragi upheld his title with the invention and launch of the PlayStation 2 in 1999, which has sold over 120 million units worldwide despite the increasing popularity of its controversial successor the PlayStation 3.
Kutaragi announced his resignation in April 2007 and officially left the company in June.
"Ken Kutaragi's passion, innovative thinking and business savvy sparked a monumental movement that was unstoppable," said Joseph Olin, president of the Academy of Interactive Arts and Sciences.
"If it wasn't for Ken and his concept of the original PlayStation, there would not be the billion dollar industry there is today. His contributions have clearly set new standards for developers, publishers and consumers worldwide."
Last year's Lifetime Achievement Award went to Howard Lincoln and Minoru Arakawa, former American Nintendo executives, for their part in the resurrection of the US gaming industry in the 1980s.
Kutaragi's award will be presented during the Interactive Achievement Awards on 7 February 2008 at the D.I.C.E. Summit 2008 in Las Vegas.
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