The linebacker led the Irish in tackles each of the past three seasons, including 103 this year when top-ranked Notre Dame went undefeated in the regular season.
It was the seventh national award for Te'o in a week. He was runner-up for the Heisman Trophy on Saturday night in New York.
The award is named for Hall of Fame defensive back Ronnie Lott and goes to a player with strong academic work, community involvement and team leadership.
Notre Dame will receive $25,000 for its general scholarship fund.
Former Secretary of State Condoleezza Rice was the speaker at Sunday night's banquet in Newport Beach.
Luke Kuechly of Boston College won last year.