Prince William revealed tonight that he proposed using the engagement ring of his mother, Diana, Princess of Wales, to make sure she "didn't miss out on the excitement".
William and his long-term girlfriend, Kate Middleton, got engaged on holiday in Kenya last month and will marry next year.
Miss Middleton, showing off the distinctive blue sapphire engagement ring alongside her husband-to-be tonight, told reporters that joining the Royal Family was a "daunting prospect".
But she added: "Hopefully I'll take it in my stride."
Prince William said of their engagement: "The timing is right now, we are both very, very happy."
Explaining why he decided to give Diana's ring to Miss Middleton, William said: "It was my way of making sure my mother didn't miss out on today and the excitement, and the fact that we're going to spend the rest of our lives together."
Asked about the proposal, Miss Middleton said: "It was very romantic, and it was very personal."
Asked if he got down on one knee to propose, William replied: "That's going to stay a secret."
The couple, both 28, ended months of speculation by announcing their engagement this morning, nine years after they met as art history students at St Andrew's University.
The Royal wedding will take place in London in the spring or summer of 2011, Clarence House said.
After getting married the couple will live in north Wales, where the Prince is serving as an RAF search and rescue helicopter pilot.
Senior Royals and politicians offered their congratulations, although the Queen and the Prince of Wales both commented on William's tardiness in proposing.
The Queen told a guest at a Windsor Castle reception for leaders of British overseas territories: "It is brilliant news. It has taken them a very long time."
Charles said he was thrilled about his son's engagement, joking: "They have been practising long enough."
His wife, the Duchess of Cornwall, who is William's stepmother, told a well-wisher the news was "absolutely wonderful".
Speaking outside their home in Bucklebury, Berkshire, Miss Middleton's parents Michael and Carole said they were "absolutely delighted".
Prime Minister David Cameron described it as "a great day for our country" and said the Prince was "thrilled" when he rang him to offer his congratulations.
Revealing that he slept on the Mall on the night of the 1981 wedding of Charles and Diana, Mr Cameron predicted that the Royal wedding would unite Britain.
He said: "It is incredibly exciting news and I'm sure that the whole country will want to pass their very best wishes to the happy couple, and wish them an incredibly long and happy life together."
Diana's brother, Earl Spencer, said: "It's wonderful news. Very exciting. My family are all thrilled for them both."
Clarence House formally announced the long-awaited development in a statement issued just after 11am today.
It said: "The Prince of Wales is delighted to announce the engagement of Prince William to Miss Catherine Middleton.
"The wedding will take place in the spring or summer of 2011, in London. Further details about the wedding day will be announced in due course.
"Prince William and Miss Middleton became engaged in October during a private holiday in Kenya.
"Prince William has informed The Queen and other close members of his family. Prince William has also sought the permission of Miss Middleton's father.
"Following the marriage, the couple will live in north Wales, where Prince William will continue to serve with the Royal Air Force."
Miss Middleton, who comes from a wealthy middle class background, was born a commoner but is now in line to become Queen.
She was dubbed "Waity Katey" for her patience in biding her time before the Prince popped the question.
William was frequently asked by members of the public when he would get married, but his stock response was "wait and see".
Miss Middleton was credited with persuading the Prince to continue his studies at St Andrew's when he considered quitting as he struggled to adjust to university life during his first year.
They moved into a shared house with two other friends in 2002 for their second year, and were rumoured to have become an item around Christmas 2003.
The couple briefly split up in April 2007, reportedly because of the strain caused by the Prince's military career, but they were secretly back together within weeks.
Miss Middleton's millionaire parents run a mail-order business called Party Pieces which sells toys and party paraphernalia.
She was privately educated at £15,000-a-year Marlborough College, where she was a keen netball and hockey player, and has two younger siblings, Pippa and James.
Miss Middleton, who works for her parents' company, has kept a low profile for the past year and has only been seen at William's side at weddings or on holiday.
The announcement of the engagement will lead to speculation about when she will take on formal Royal duties.
The Prince, who visited Afghanistan at the weekend to mark Remembrance Sunday with serving British troops, is currently based at RAF Valley on the island of Anglesey in north Wales.
For the past six months Miss Middleton has spent part of the week living with William in a rented cottage on Anglesey.
There was speculation today that there will be an extra bank holiday next year to mark the marriage.
Bookmaker Paddy Power has made Saturday August 13 2011 the 3/1 favourite for the date of the Royal wedding.