The acclaimed musician and songwriter, who hails from the Maiden city, will have the honour conferred on him at the Guildhall later on Friday.
The winner of five Ivor Novello awards, he has 23 platinum, 39 gold and 52 silver discs among his many accolades.
Mr Coulter said this award meant more because it was “from my own people”.
“I have always thought of myself as a Derry man. Derry has always loomed very large in my life. It has shaped me as a man and shaped me as a musician,” Mr Coulter said.
“I’ve always been very pleased that I’ve been held in some kind of high regard in the city.”
Born in Derry in 1942, the songwriter is viewed as one of the most eclectic composers to come from the island of Ireland.
Coulter’s The Town I Loved So Well is seen by many as Derry’s unofficial anthem. He also penned a song to celebrate Derry becoming the UK City of Culture in 2013.
The songwriter joins a select list of people to have received the freedom of Derry.
Notable recipients of the freedom of the city include John Hume, football manager Jim McLaughlin and former Catholic and Church of Ireland bishops Edward Daly and James Mehaffey.
“I’ve said many times, when asked about my career, my first smart move was being born in Derry,” he told BBC Radio Foyle.
“Given that history and giving the musical influences throughout the years it feels like a circle being completed with this honour”.
Despite being an accomplished pianist, the Derry native said it “wasn’t love at first sight” when he first began tickling the ivories.
“I would love to be able to tell you that I was born to the piano and the piano was an extension of myself in those very early days.
“The truth is I hated the piano, I hated the scales, the arpeggios, I hated the five-finger exercises, and above all I hated my piano teacher.
“He was one of the old-school teachers that If you played the wrong note would crack you across the knuckles with a ruler – that wasn’t going to endear any seven-year-old to music or the piano.”
Mr Coulter’s passion for the piano was reignited when he began studying at St Columb’s college.
“At St Columb’s I started picking up little tunes listening to the radio, picking up melodies from pop songs by ear,” he said.
“I then started music lessons purely out of curiosity. I believe the best motivation to do anything is when you want to do it and I wanted to learn. That was my second go at piano and thankfully it took off.”
Mr Coulter is set to be bestowed with the freedom of the city at a ceremony at 4:15 pm on Friday, October 7.He is also set to perform in the city’s Ebrington Square in a ‘Come and Sing’ event the following day.
“It’s free of charge, just show up and come and sing along,” Mr Coulter said.
“We are inviting people who like to sing, not necessarily those who can sing – everyone in Derry thinks they can sing – whether they can or not is another thing.”
The musician said that he wants people of all ages to come and join him in a rendition of The Town I Loved So Well to “celebrate the city and celebrate the song”.
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