New Zealand-born Ms Wake grew up in Sydney and after a brief stint as a nurse, worked as a journalist in
Europe, where she married a French businessman in 1939.
Trapped in France when the Nazis invaded, Ms Wake worked with the Resistance as a courier and later as an effective saboteur and spy.
She became the Gestapo's most wanted person, receiving the enduring nickname "The White Mouse".
RSL national president Rear Admiral Ken Doolan has paid tribute to the courage of Ms Wake and says she remains a great role model for all Australians fighting for freedom.
"What Nancy Wake did was quite unique and for her time she stood up in the most courageous way, and she's a tremendous role model in that respect," he said.
Ms Wake is regarded as a heroine in France, which decorated her with its highest honour, the Legion d'Honneur, as well as three Croix de Guerre and a French Resistance Medal.
Victorian RSL president David McLachlan told ABC local radio that Ms Wake thwarted the Gestapo with her every attempt.
"She was very much involved in providing information for the planning of D-Day," he said.
"She parachuted back in behind enemy lines after she'd been back to England.
"The Gestapo hated her, wanted her, more than anybody else, and she was an incredibly brave woman."
Close friend Les Partell says Ms Wake, who died just days before her 99th birthday, earned her nickname because she was so hard to capture.
"They could not catch her," he said.
"Whenever somebody dobbed her in, they would go there and she would be gone. Nancy would get away from them.
"The world offered a reward for anyone who could catch The White Mouse. They grabbed her husband, Henri, and the Gestapo tortured him to death."
Prime Minister Julia Gillard says Ms Wake was a woman of exceptional courage who had saved the lives of hundreds of allied personnel during World War II.
"Our nation honours a truly remarkable individual whose selfless valour and tenacity will never be forgotten," she said.
"Nancy Wake will remain an abiding inspiration to generations of Australians."
Across the Tasman, New Zealand veterans' affairs minister Judith Collins says Ms Wake's achievements have been acknowledged by members of the Special Forces, past and present.
"Her death will deeply affect many veterans, who will view her passing with a great sense of loss," she said.
She says while Ms Wake had lived most of her life abroad, she had visited family in her home country as a teenager.