Lance Corporal Matt Croucher, 24, a reservist from Birmingham, survived because his rucksack and body armour took the force of the blast.
He was part of a reconnaissance troop in Helmand Province, Afghanistan, in February, when the incident happened.
The Ministry of Defence said he could be considered for the Victoria Cross.
A spokesman said L/Cpl Croucher’s comrades had made a citation to their commanding officer and officers were now considering whether to put his name forward for the honour.
L/Cpl Croucher, a member of 40 Commando, had been searching a compound south of Sangin which was suspected as being used for making bombs to attack British and Afghan troops.
When a Taleban booby-trap grenade was tripped, L/Cpl Croucher jumped on to the device to absorb the force of the explosion with his backpack as his comrades dived for cover.
The blast blew his rucksack more than 30ft away but he remarkably suffered only severe shock and a bloodied nose in the incident.