Yousafzai won the annual prize from the National Constitution Center for her "courage and resilience in the face of adversity and for serving as a powerful voice for those who have been denied their basic human rights and liberties," the NCC said.
The ceremony was attended by different dignitaries including Malala's father and Pakistan's permanent ambassador to the UN Masood Khan.
The 17-year-old gave a speech outlining her desire to see 57 million children out of school given the right to an education, speaking less than two weeks after winning the Nobel prize with India's Kailash Satyarthi.
"I'm honored to receive this medal," she said in an address peppered with jokes.
"It encourages me to continue my campaign for education and to fight for the rights of every child," she added, announcing the money would go toward education in Pakistan.
She called on countries around the world to stop spending money on weapons and instead invest in their children's futures.
"Education is the best weapon through which we can fight poverty, ignorance and terrorism. So I ask all countries all around the world, let us say no to wars."
She condemned the killings of children in Palestine, asking why they are being killed and that "their fault is to be born in that area."
She also raised a voice against the kidnapping of more than 200 girls by Boko Haram militants in Nigeria, hoping that they be released soon.
The schoolgirl, who currently lives in Britain, rose to prominence in Pakistan by campaigning for girls' right to education.
In October 2012, she was shot in the head by a Taliban gunman and is regarded with suspicion and hatred among many in the country.
Evacuated to Britain, she made a remarkable recovery and today attends school and flies around the world to champion for universal access to education through her Malala Fund charity.
"Even though there are efforts under the Malala Fund, there are 59 million children out of schools which needs combined efforts," Malala said.
Malala, during her speech said she thought in her childhood she would be able to help every child go to school, however with the passage of time she realised that that goal is far away.
"One voice, one book and one child is not sufficient for this -- concerted efforts are needed for it," she said.
"There is no objection in Islam over the education of women," she said. "Instead, it is their responsibility, in Islam, to get education."
"Malala's courageous fight for equality and liberty from tyranny is evidence that a passionate, committed leader, regardless of age, has the power to ignite a movement for reform," said NCC chairman Jeb Bush.
"Let us all, young and old, strive to be like Malala -- to challenge the status quo and to serve as catalysts for meaningful change."
Tuesday's ceremony included speeches from women with powerful stories about education, including Minnijean Brown Trickey, who helped integrate an Arkansas high school in 1957, and University of Pennsylvania president Amy Gutmann, a first-generation college student, who praised Yousafzai for her "compelling vision and immense courage."
People outside the venue were protesting against the death sentence given to Pakistani christian woman, Aasia Bibi, on blasphemy charges by the Lahore Hugh Court a few days back.
They were carrying placards inscribed with quotations in favour of Aasia.
The Liberty Medal is awarded to people who strive to secure freedom for people around the world.
Malala has become the world's youngest Nobel Prize and Liberty Winner. She has become the seventh Liberty Medal recipient to subsequently receive the Nobel Peace Prize.
Past recipients include former presidents George H W Bush and Bill Clinton, Nelson Mandela, Shimon Peres, Kofi Annan and Bono.
COMMENTS (11)
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When is next coming? waiting!
The teenager from the beautiful land of sea green Emeralds has shown to the world that no one can deny the pashtun girls the right to education.
Rex Minor
way to go! We Pashtuns are very proud of you.
as Malala said, she will donate this money for Pakistani girls, why does not she annoces a scholsrship for Engineering/BCS girls from KPK at LUMS/FAST
Daugter Malala... We are proud of you..
Give her as many medals as you want because no one survives Drone attacks!
This is great news. Conspiracy theories can be many but Lets be optimistic. Lets derive the very positives out of this whole Malala melodrama.
Great job Malala !!
Another investment of US and EU in Pakistan. Hunderds of students were killed in just south asian countries and none of them even were remembered.. Pakistanis are dealing with this matter emotionally if for once they think logically then they know what is behind all this.
Pah ! here an award, there an award, everywhere an award award or a nomination ...
bus kardo.. kuch ziada hi ho gaya hay... ek aur medal??? mere samjh say bahar say.. aysa kia kardia is nay?