The tribute, which will be unveiled in the autumn, will be positioned on Celtic Way.
McNeill won nine league championship titles in a row, seven Scottish Cups and six League Cups during a glittering Hoops career.
But his finest hour came in Lisbon on May 25, 1967 when he became the first British team captain to lift the European Cup.
McNeill’s 27-year association with the club also included two spells as manager during which he led the team to four league titles, three Scottish Cups and a League Cup.
He will become the fourth Celtic icon to be honoured with a statue after founder Brother Walfrid, manager Jock Stein and the club’s greatest-ever player Jimmy Johnstone.
McNeill, 75, said: “When Peter Lawwell contacted me regarding the statue I was completely taken by surprise.
“Whenever I walk up the Celtic Way, I look on with a great sense of pride at the sight of Brother Walfrid, Big Jock and my old team-mate and friend Jinky rightly taking their place almost as guardians of Celtic Park.
“Every time I look back at this special club’s history and what we achieved it fills me with joy. Now to be told I am to be honoured beside these Celtic greats, this really is a special day for me and all my family.”
The statue will be sculpted by John McKenna, who was also responsible for the tribute to Stein.
Chief Executive Peter Lawwell hailed the contribution of the man affectionately known as Caesar.
He said: “Growing up in the 1960s and 1970s as a Celtic supporter, Billy McNeill was an inspiration to me and someone of huge stature in the game, not only on the field but also off it, as a statesman, a leader and a figurehead for our great club.
“His achievements for Celtic are simply outstanding and across a period of 27 years he gave so much to the club.
“It is a privilege to now know Billy and consider him as a friend.
“He is someone who commands the respect of everyone across the entire footballing spectrum.
“We are delighted already to have Billy as our Ambassador at the club, but the Board felt unanimously that he should recognised in this way, given all that he has contributed to Celtic over so many years.
“We look forward to the unveiling of the statue, which we are sure will be a great tribute to a great man.”
* We have a limited number of signed copies of Caesar & The Assassin – managing Celtic after Jock Stein available at www.cqnbookstore.com