Underwood played 86 test matches for England and took 297 wickets, the country's highest wicket-taking spinner of all time in the format and the sixth highest wicket-taker overall. His 16-year international career includes 17 five-wicket hauls.
The retrospective ICC rankings put him as the world's number one bowler for nearly four years between 1969 and 1973.
Underwood, born in Kent, played for his local club for 24 years before retiring in 1987 and had 10 seasons where he took 100 or more wickets.
"Watching Derek weave his unique magic on a wet wicket was a privilege for all who were able to witness it," Simon Philip, chair of Kent Cricket, said in a statement.
"His induction into the ICC Hall of Fame shows the esteem in which he was held in world cricket."
Underwood also served as the president of Kent Cricket and the Marylebone Cricket Club after retiring as a player.
"Derek also made substantial contributions off the field as well as on it and he will be sorely missed by everyone at Kent Cricket," Philip added.
