Ronnie Russell jumped out of his car in Pall Mall on 20 March 1974 after witnessing the late night incident unfolding, in which Ian Ball shot the Princess’s chauffeur, minder, a policeman and a passing journalist.
Mr Russell, a former heavyweight boxer, punched the would-be kidnapper twice in the head as Ball tried to tried to drag Princess Anne from the royal car.
Now 72-years-old, Mr Russell is reluctantly selling the George Medal he was given by the Queen as a mark of gratitude.
Following several strokes, the pensioner is said to be in poor health and wants to provide for his future.
He has, however, revealed how the Queen paid off the mortgage on his house in Strood, Kent, after the incident.
The 72-year-old, now living in Bristol, said before receiving his medal he was visited by police.
"They were looking round my home and saying, ‘Oh this is a nice house’," he told the Daily Mirror.
"They asked if I had a mortgage and I said, ‘Yes, yes, why?’
"They said, ‘Well we are really telling you this a bit early but the Queen is going to pay off your mortgage as a gift for what you have done.’
"I thought that was wonderful. I was actually close to repossession at the time. They were going to repossess my home. So I dug myself out of that one."
The Mirror quoted Buckingham Palace as saying the Queen’s gift would have come from her private funds.
The former heavyweight boxer says he remembers the night of 20 March 1974 clearly.
"It was very fast-moving but it is as clear to me now as it was the day it happened," Mr Russell said.
"I punched him twice. The first time was when I got out of my vehicle and I thought it was a road rage incident.
"He shot (the policeman) and I went to hit him around the back of the head, and he turned and shot at me and it went through the windscreen of a taxi."
Mr Russell said Ball was trying to drag Princess Anne from her car while her new husband, Captain Mark Phillips, was pulling her back.
"She was very, very together, telling him, ‘Just go away and don’t be such a silly man’,” he said.
"He stood there glaring at me with the gun and I hit him. I hit him as hard as I could – if he had been a tree he would have fallen over – and he was flat on the floor face down."
Ball was later sent to a psychiatric hospital by an Old Bailey judge.
Mr Russell’s medal will be auctioned at Dix Noonan Webb in London next month, and is expected to fetch between £15,000 and £20,000.