It has been permanently allocated to the National Portrait Gallery (NPG) in London, which in 2012 staged the Lucian Freud Portraits show, the gallery's most visited ticketed exhibition.
The news comes at the same time as confirmation that the catalogue raisonné of a fellow Modern British great - Francis Bacon - will be published on April 28 next year (see below).
The NPG plans to make the Freud archive, which has never been published or exhibited, accessible to the public. It hopes to display a selection of representative items in early summer 2016.
This archive includes numerous studies which relate to major works by Freud (1922-2011) now in significant collections. One of the sketchbooks - originally an 18th century ledger - contains drawings of Caroline Blackwood that relate to Freud's celebrated early work Hotel Bedroom, 1954.
The archive contains 47 sketchbooks, additional drawings, a collection of 162 childhood drawings and letters from the artist. The acceptance of the material settled £2.94m of inheritance tax.
Francis Bacon Catalogue
The Bacon catalogue raisonné is the most comprehensive collection of Bacon's works, reproducing 584 of his paintings. Art historian Martin Harrison, who has been employed by the Estate of Francis Bacon to produce the five volumes, which will cost £1000, unearthed more than 100 unknown works during a decade-long search.
Bacon destroyed many of his paintings and only about half of the 584 that survive are accessible or in circulation. Harrison told The Guardian: "The stuff that has been written about Bacon, some good and much of it less good, is based on about a third of his work.
"The great revelation of the new catalogue raisonné will be that, for the first time, Bacon's entire output can be seen and assessed. It will, we believe, have a profound effect on the perception of his paintings."
In November 2013, Bacon's 1969 triptych Three Studies Of Lucian Freud, made $127m (£83m) at Christie's New York - the record for any lot ever sold at auction at the time.