Paine was a member of England's 1966 World Cup-winning squad and played 815 times for Saints between 1957 and 1974.
He has now been appointed honorary president and will take up the role on January 1, with a remit to act as an ambassador for Saints both at home and abroad.
The 73-year-old, who lives in South Africa, will be presented with his new title by the family of ex-Southampton manager Ted Bates on New Year's Day before the Arsenal game.
"It is a great honour for me to be named honorary president of Southampton Football Club," Paine told the club's official website, www.saintsfc.co.uk.
Executive chairman Nicola Cortese, who was recently accused of not wanting "anything to do with anything that happened before he turned up" by club stalwart Matthew Le Tissier, said: "I can think of no one more deserving of this prestigious title than Terry Paine."
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