The announcement was made by the Prime Minister, Malcolm Turnbull, who presented the Australian of the Year trophy at a ceremony held on the lawns of Parliament House in Canberra.
The former Lieutenant-General Morrison, now retired from the Army, was awarded the honour for his commitment to gender equality, diversity and inclusion.
David Morrison was the first head of the Australian Army to take a public stand against the military's ingrained culture of gender discrimination.
His 2013 video message, ordering misbehaving troops to 'get out' if they couldn't accept women as equals, went viral.
Since then, the number of women joining the army has grown by two per cent.
Mr Morrison retired in 2015 after 36 years in the Australian Army, and four years as its Chief.
He is now the Chair of the Diversity Council Australia.
David Morrison says he is honoured to be Australian of the Year, and says he will be dedicating his time to ensuring all Australians - regardless of gender, colour or creed - have the same opportunities.
"Too many of our fellow Australians are denied the opportunity to reach their full potential. It happens because of their gender, because of the God they believe in, because of their religious heritage, because they're not able bodied, because of their sexual orientation. And we as a nation, looking forward to the future, realising the extraordinary contributions that we can all make, should be able to give them the chance to reach their potential. Because when they do, we all benefit, and that's what true diversity is about."
Also honoured at the ceremony was Professor Gordian Fulde who was named the 2016 Senior Australian of the Year.
Professor Fulde is the longest serving emergency department director in Australia, working as the Director of Emergency at St Vincent's Hospital and Sydney Hospital for more than three decades.
He says the culture of drug and alcohol abuse within Australia must be stopped.
"It's really not about me, what it is about is us as a community. We do not want excess alcohol or drugs causing so much damage and devastation. We really do not need to be drunk and ugly or out of it to enjoy this fantastic country, Australia. In Australia we really do look after our mates and eachother."
Meanwhile, the 2016 Young Australian of the Year Award has been presented to 21 year old social entrepreneurs Nic Marchesi and Lucas Patchett.
The two friends built a free mobile laundry in their old van to help the homeless.
Orange Sky Laundry began in September 2014 and, since then, the charity has expanded to five vans in Brisbane, Melbourne, South East Victoria, Sydney and the Gold Coast.
Run by more than 270 volunteers, the custom fitted vans with two commercial washing machines and two dryers, service over 36 locations.
This is the first time the Young Australian of the Year has been jointly awarded to two people.
Mr Patchett says he is excited to continue to develop the charity.
"Every night, 105,000 Australians do not have a place to call home. They do not have safe, quiet and particularly tonight, a dry place to sleep. They do not have a basic human right: clean clothes and conversation."
Youth educator Dr Catherine Keenan, from NSW, is Australia's Local Hero 2016.
A former journalist, Dr Keenan turned her back on her career in 2012 to help nurture the talent and creativity of marginalised young Australians.
As the co-founder and executive director of the Sydney Story Factory, Dr Keenan has helped thousands of primary and high school students express themselves through writing and storytelling.
She says her work has helped young people harness their creativity.
"I have seen it time and again. When kids are able to tell their stories, they stand just that little bit taller. Giviong young people creative opportunities amplifies who they are and who they might become. Wouldn't it be fantastic if all children in Australia had equal access to these creative opportunities. Particularly our Indigenous young people, who lag behind so far with literacy skills."
