The event will be held in the council chamber at 6pm on June 24 and is open to the public who can watch from the gallery.
There is space for up to 100 people in the gallery but there were fears that many more would want to watch.
So now bosses have agreed to screen the event in the town hall.
Holder has also agreed to appear in the town hall after the ceremony so members of the public can take photographs of him and wish him well.
Council leader Mike Bird said: "We're delighted that Noddy Holder has accepted this honour which has only been conferred 21 times in the last 109 years.
"The ceremony itself has to be limited to invited guests but we understand that it's not every day that rock royalty visits Walsall so Noddy has very kindly agreed to spend a few minutes in the town hall after the ceremony so fans can take pictures.
"He will then go into the planned private reception.
"While there won't be time for individual photos and signings people will at least be able to see him, wish him all the best and take photos of him with the scroll that he will have been presented with."