The award, which includes a cash prize of Rs 500,000 and a citation, was announced, here on Tuesday, by State Minister for Culture and Cinema A.K. Balan. It will be presented next month.
Sheela, still active in the industry, along with evergreen actor Prem Nazir hold a world record for acting in the largest number of films -- 110 -- together as heroine and hero in the 1960s and 1970s.
Even though she began her career in the Tamil film "Paasam" opposite M.G. Ramachandran, Sheela reigned supreme in the Malayalam industry in the sixties and seventies alongside the giants, including Sathyan, Nazir, Madhu and Jayan.
In the latter part of her career, she shared screen space with present-day superstars Mammootty and Mohanlal.
After almost a two-decade break, Sheela returned to the screen in 2003 with Malayalam film "Manassinakkare". In 2005, she won the National Film Award for Best Supporting Actress for her role in the film "Akale".
In a career spanning more than five decades, she has acted in close to 500 films in South Indian languages besides trying her hand at direction.