More than 80 squadron members including air crew, engineers and support staff, took part, watched by their families.
Also present were past commanding officers Air Marshal Baz North, Air Commodore Paul Lyall and Group Captain Chris Luck.
Prince Michael, who is RAF Benson?s honorary air marshal, arrived on the parade square wearing full military regalia and carrying a ceremonial sword.
He was greeted by a welcoming party including the squadron?s officer commanding Wing Commander Shane Anderson, who led the parade, and RAF Benson?s station commander Group Captain Nigel Colman.
The prince stood to attention on a dais while the squadron presented arms and the Central Band of the Royal Air Force played the national anthem.
A Puma Mark 2 helicopter, one of 24 which are to enter service with the squadron later this year, launched the ceremony with a flypast.
Prince Michael and Wg Cdr Anderson inspected the squadron, after which its old standard was marched off the square. The new standard was then unveiled and laid down in front of the royal visitor before being consecrated by the RAF?s chaplain-in-chief the Ven Ray Pentland.
Prince Michael then presented it to 33 Squadron?s standard bearer Flt Lt Jamie Anderson.
Members of the squadron removed their hats and shouted three ?hurrahs? for the Queen. They then paraded the new standard around the square accompanied by the band.
After the ceremony, the participants drank champagne outside their barracks while a Hurricane fighter from the Battle of Britain Memorial Flight performed manoeuvres overhead.
They then attended a formal lunch in their hangar where Prince Michael gave a speech.
The prince, who is a retired army major, said: ?I have witnessed this squadron deploy on operations and exercises around the world and I have watched as you have continually risen to the challenge of the ever- increasing demands placed upon you. I am honoured to share this fine occasion with you. It is a time of great change for the squadron and you, its personnel ? you will have a very impressive new aircraft and I believe this new standard is highly fitting.
?I look forward to seeing 33 Squadron rise to every challenge you may face, as did your forbearers.?
33 Squadron was formed in 1916 and was the world?s first dedicated night fighter force.
During the Second World War it fought in the Battle of El Alamein and flew fighter support for the Normandy landings. The squadron moved to RAF Benson in 1997 and now supports land forces using the Puma helicopter.
It fought alongside the army in Iraq and was one of the last British airborne regiments to withdraw in 2009.
The new silk standard depicts a hart in honour of the Hawker Hart biplanes it flew between the two world wars.
The old standard will be archived at St Clement Danes RAF church in Westminster. Flt Lt Anderson said: ?It?s a great honour to be able to carry the new standard. This only happens once every 25 years so it was a real once-in-a-career opportunity.?
Wg Cdr Anderson said: ?For a layman, the standard looks like a flag but for us it?s much more than that. It?s a symbol of our history, our traditions and our ethos.
?It commemorates the famous battles that we took part in, it commemorates our fallen and it binds us together. Our motto is ?loyalty? and it represents that for all members of the squadron.?