The Alan Turing £50 banknote will be issued for the first time on 23 June to coincide with what would have been his 109th birthday.
Turing is often considered to be the father of computer sience, but he also played a key role in the efforts to win the Second World War.
His best-known achievement was his role in cracking the Enigma code, used by Nazi forces during the conflict.
Breaking the Enigma code helped to shorten the length of the Second World War by at least two years, saving millions of lives.
"There's something of the character of a nation in its money, and we are right to consider and celebrate the people on our banknotes," Bank of England Governor Andrew Bailey said.
Mr Bailey added: "[Turing] was a leading mathematician, developmental biologist, and a pioneer in the field of computer science.
"He was also gay and was treated appallingly as a result.
"By placing him on our new polymer £50 banknote, we are celebrating his achievements, and the values he symbolises."
The announcement was made as the Bank of England unveiled the design of the new £50 note, which contains advanced security features.
The note will join the Sir Winston Churchill £5, the Jane Austen £10 and the JMW Turner £20.
In honour of Alan Turing appearing on the new £50 note, GCHQ has created its "toughest puzzle ever".
GCHQ officials said their new treasure hunt involving 12 puzzles "might even have left him scratching his head".
The puzzles are based on the unique design elements of the new banknote, such as the technical drawings for the British Bombe, the machine designed by Alan Turing to break Enigma-enciphered messages.
Director of GCHQ Jeremy Fleming said: "Alan Turing's appearance on the £50 note is a landmark moment in our history."
He added that Turing's legacy is "a reminder of the value of embracing all aspects of diversity, but also the work we still need to do to become truly inclusive."
Who was Alan Turing?
Alan Turing was born on 23 June 1912.
He studied Mathematics at King's College, University of Cambridge, gaining a first-class honours degree in 1934 and was elected a Fellow of the College.
In 1936, his work 'On Computable Numbers' is seen as giving birth to the idea of how computers could operate.
His "Turing test" also examined the behaviour necessary for a machine to be considered intelligent – the foundation for artificial intelligence.
During the Second World War, together with a team at Bletchley Park, Turing was able to crack the Enigma code.
While best known for his work devising code-breaking machines during the war, he also played a pivotal role in the development of early computers, first at the National Physical Laboratory and later at the University of Manchester.
Turing was homosexual and was posthumously pardoned by the Queen, having been convicted of gross indecency for his relationship with a man.
He died in 1954 of cyanide poisoning with the coroner at the time ruling Turing had taken his own life.
Cover image: Bank of England.