A "remarkable" police constable killed in the line of duty represented "everything we treasure" in the force, said the Prime Minister.
Together with Geraldine Winner of the Police Memorial Trust, Theresa May unveiled a memorial stone in honour of married father-of-two Dave Phillips, 34, who was mown down and killed by a teenage car thief in October 2015.
Pc Phillips's widow, Jen, and young daughters Abigal and Sophie, attended the service at Hamilton Square in Birkenhead, Merseyside, along with the officer's other family members, friends and colleagues.
It was the 42nd memorial to a fallen police hero and the first on Merseyside by the trust founded by the late movie director Michael Winner.
Theresa May told those gathered: "Pc Phillips epitomised the very best of everything we treasure in our policemen and women.
"Compassion, professionalism, that overwhelming ethos of service and the extraordinary selflessness that meant day in and day out he saw it as his duty to risk his life for the safety of his community.
"It was that duty and those remarkable qualities that led Pc Phillips to take on a criminal driving a stolen vehicle that fateful night.
"It was that duty and those remarkable qualities that led him to make the ultimate sacrifice."
She continued: "First as Home Secretary, now as Prime Minister, I have dreaded the moments when the news comes through to me that one of our policemen and women have been killed in the line of duty but that pales into insignificance when compared to the devastating loss suffered by his family.
"We mourn the cruel loss of a loving husband, father, son, brother, colleague and friend but as we remember it is absolutely right to share an overwhelming sense of pride in everything that Pc Phillips was and everything he stood for."
Mrs May said the memorial provided a place for people to stop and remember a "local boy who became a national hero".
Mrs Winner said: "It is absolutely right that the landscape of Merseyside and the Wirral will change just a little and this memorial set in the garden of this beautiful square is a fitting place for visitors to remember Pc Phillips for generations to come.
"Pc Phillips will not be forgotten. The Police Memorial Trust will not allow the public to forget. That is the reason why we are here today."
The officer's daughters were in tears during the service with Mrs Phillips cradling youngest Sophie during the speeches.
Pc Phillips was killed in the early hours of October 5 2015 while trying to stop a stolen vehicle in the Wallasey Docks Link Road North.
The driver, Clayton Williams, then aged 19, was later convicted of his manslaughter and jailed for 20 years.
Merseyside Chief Constable Andy Cooke paid tribute at the service to the "great dedication, humility and courage" shown by Pc Phillips in serving the communities of the Wirral.
He said: "Dave was a gentleman and a solid, hard-working police officer; a role model for every Merseyside Police officer.
"The wider support and volume of condolence messages from our partners, members of the public and colleagues from around the globe was astounding.
"Dave represented everything that people want from their police service and that is good
"Friends and colleagues have channelled their grief and worked extremely hard to help raise money through charity runs and walks for the memorial fund that was set up in Dave's memory.
"It's been inspiring to watch the tremendous positivity that has come from such a tragic event.
"Dave was a man that we were all proud at Merseyside Police to say was one of us. And he was one of our finest.
"This memorial serves as a reminder and a focus that good will always prevail and conquer evil."
Following the service, Pc Phillips's father, Robin, said of the memorial: "It's a focal point for us to come and visit, whether it be on Armistice Day or any time we want to go there.
"It's also a reminder of the sacrifice that Dave did and it is there as a permanent memorial.
"However ghastly and tragic the whole situation was, a lot of good has come out of it and we are very grateful for all the support we have been given."