The local branch of Campaign for Real Ale (CAMRA) – the volunteer organisation that campaigns for real ale, real pubs and consumer rights – has chosen the hotel over hundreds of others to be the region's Pub of the Year.
Awarded by the organisation's Edinburgh and South East Scotland branch, the title recognises beer quality, service and welcome, atmosphere and a commitment to the community.
The Border Inn's delighted owners are Margaret and Phil Blackburn.
Margaret said: "We're absolutely amazed and so proud to win this award. It gives us a great fillip in what are difficult times."
The hotel was also the joint winner of Borders Pub of the Year title with the Craw Inn at Auchencrow before going on to win the regional title.
Mrs Blackburn added: "It is especially exciting for a rural pub in the Borders to have been selected over the many pubs in Edinburgh."
The historic former coaching inn dates back more than 250 years, but in 2006 suffered a fire which burned down much of its oldest thatched section.
The Blackburns had only owned the five-bedroomed hotel for two years when the kitchen and their son and assistant manager Craig's flat were destroyed in the blaze.
But the family kept their business open, rebuilt the section in a year and just over two years later have won the CAMRA accolade.
Mrs Blackburn said: "We are grateful to the locals who have been into the pub and congratulated us on this achievement and we would like to thank them for their support, especially during the last two years when we have worked hard to rebuild the business following the devastating fire."
Branch Pub of the Year coordinator Ken Finland said: "We're delighted that a rural pub should take this year's title.
"With 39 pubs in Britain closing every week and those in rural areas being particularly affected by the current economic crisis, CAMRA's appeal is simple: 'Use your local or risk losing it'."
The Border Hotel is renowned amongst walkers worldwide as the end of the 268-mile Pennine Way where finishers are rewarded with a free drink.
Broadcaster and writer, fell walker Alfred Wainwright, started the tradition, now sponsored by a brewery.
The hotel will now go forward to the Scotland and Northern Ireland heat and, if it wins that, will be in the national final.
Commenting on the Craw Inn success, branch chairman Giles Whitfield said: "This accolade acknowledges consistently good beer, excellent service from a friendly landlord and staff, plus a great community spirit."