Prime Minister Gordon Brown announced the creation of the award after his visit to Auschwitz last year, following a campaign by the Holocaust Educational Trust to recognise British citizens.
Receiving the award, a silver medallion inscribed with the words: "In the service of humanity", Mr Avey said: "It's important to be understood nationally by the government.
"Auschwitz was a place of evil. People know about what happened now, and I hope it never happens again."
Mr Brown called the recipients "extraordinary and selfless". He said: "These individuals are true British heroes and a source of national pride for all of us."
Dorothy Aalon, whose school matron cousin Jane Haining protected Jewish schoolgirls in Budapest before she was taken to Auschwitz in 1944, said the ceremony made her "very emotional".
"My mother always told me stories as I was growing up," she said. "When I think about what she went through I get upset because it's someone I was actually related to that went through these difficult things."
Phyllis le Druillenec travelled from Jersey to receive the award on behalf of her late husband Harold, who, along with his two sisters, sheltered and taught two Russian POWs on the island. All three were arrested: Mr le Druillenec became the last British citizen to survive Belsen.
Mrs le Druillenec, 100, said: "I'm very pleased my husband is being recognised in this way. I feel very proud of what he did."
Richard Dunstan, the great-nephew of Major Frank Foley, who worked as a spy in the British embassy in Berlin and issued fake visas to Jews, said he was "proud" to attend the ceremony.
"When we were younger, my mum used to tell me stories about him," he said. "I knew he used to come back from trips abroad with boxes of fruit no one had seen before. My grandmother used to sew on his medals. But I only knew little stories like that. When I realised the big picture, I thought: 'Wow'."
It was only when author Michael Smith began to research Major Foley that the full story was uncovered. He published Frank Foley: The Spy Who Saved 10,000 Jews in 1999.
"I think the truth was the total opposite of the way it's shown in spy films," Mr Dunstan said. "He was more George Smiley than James Bond."
Among the 25 others honoured were Sister Agnes Walsh, from Hull, who sheltered a family in her convent in France, Sergeant Charles Coward, an Auschwitz POW who smuggled food to Jewish inmates, and Princess Alice, the mother of the Duke of Edinburgh who sheltered Jewish women in wartime Greece.
