Wearing blue, yellow and brown robes, Shetty was praised for her "dignity and poise" during her participation in the Celebrity Big Brother reality show earlier this year.
Addressing the graduates, university vice-chancellor Simon Lee said: "There are some parallels between the challenges faced in any house and student life. Someone at some time will behave badly, not necessarily to you but to others or the wider community, to someone or some group who cannot defend themselves.
"In Shilpa Shetty you are graduating with someone who rose to that challenge with great dignity and poise, making a difference."
Accepting the award, Shetty said: "I am so overwhelmed, I am choked with emotions and I can't stop smiling. I have won some awards, at the cost of sounding immodest, I have never seen my mother beam so much as she is today.
"I can see the pride in her eyes because she's always wanted me to graduate. If you see anyone suffering indignity, stand up for them."
The university is the official education partner of the International Indian Film Academy (IIFA). During the annual IIFA awards in Yorkshire, the university awarded honorary doctorates to India's Minister for Civil Aviation Praful Patel, and Indian film personalities Amitabh Bachchan, Shabana Azmi and Yash Chopra.
Keen to forge closer links with India, the Leeds Metropolitan university is in the process of setting up two academic chairs: the IIFA Chair for Global Cinema, and an India 60 Chair celebrating 60 years of Indian independence.