He was awarded the Joey Dunlop Trophy at the Adelaide Motorcycle awards in Belfast on Friday.
Farquhar, who announced his retirement from competitive racing in September, saw off competition from riders including Jonathan Rea and Eugene Laverty to clinch the title.
"To actually win it, it's one of the biggest shocks I've ever had," he told UTV.
"It's the last award that I'm ever going to win, as a rider and what a way to go out.
"It's the biggest award any Irish rider can win and it's a perfect way to end my career."
He said the night was an emotional one after tributes were paid to riders who lost their lives last year, which included his uncle Trevor Ferguson, who died in a crash at the Manx Grand Prix.
"My earliest memories are going motorbike racing with him and it hit me harder than anything that's gone before," he said.
"I'm just trying to think of all the good times and all the good memories. Road racing has been really good to me, I'm intending on running the team in 2013 to put something back into the sport that has been good to me."
He added: "I'm so proud that so many people have voted for me and appreciate what I've done. A big big thank you to everyone who voted for me tonight and made it possible to lift this Joey Dunlop trophy."