Scots will vote on whether or not the country should become independent on September 18 2014.
The long-awaited date for the historic ballot was announced by Scotland's First Minister Alex Salmond.
The Scottish National Party leader declared that would be the "historic day when the people will decide Scotland's future".
Mr Salmond announced the date to Holyrood as the Scottish Independence Referendum Bill was published.
The Bill is "the most important legislation to be introduced" since the devolved Scottish Parliament was established in 1999, the First Minister said.
He said the legislation is important for what it would allow Scotland to achieve "with the powers of an independent country".
The vote is taking place after the Scottish National Party won an unprecedented majority in Holyrood in the 2011 election.
Mr Salmond said that in the ballot the people of Scotland would have a choice.
"Next year the choice facing the people is one of two futures. A No vote means a future of governments we didn't vote for, imposing cuts and policies we didn't support. A Yes vote means a future where we can be absolutely certain, 100% certain, that the people of Scotland will get the government they vote for," he said.
Mr Salmond said: "I am honoured to announce that on Thursday September 18 2014 we will hold Scotland's referendum - a historic day when the people will decide Scotland's future."
The ballot takes place 547 days from now, he said.
"I believe it will be the day we take responsibility for our country, when we are able to speak with our own voice, choose our own direction and contribute in our own distinct way."
Leaving the United Kingdom and becoming a separate country would give Scotland a "new, more modern relationship with the other nations of the UK" that would be a "true partnership of equals".
He said: "I believe on September 18 the people of Scotland will vote Yes to create a better country than we have now, one we can pass on with pride to the next generation."
Independence will prevent "draconian welfare reforms" from being "imposed" upon Scotland by the Westminster Government, Mr Salmond said.
The Scottish Parliament would try to mitigate the worst affects of changes such as the so-called bedroom tax which will see housing association and council tenants lose some of their benefits if they have spare bedrooms.
"Until we have the full powers of independence we cannot prevent them from being imposed upon the people of Scotland," he said.
"The choice becomes clearer with each passing day: the opportunity to use our vast resources and talent to build a better country, or to continue with a Westminster system that simply isn't working for Scotland."
The independence referendum is taking place after the Scottish National Party won an unprecedented majority at Holyrood in the 2011 election.
Negotiations with the UK Government followed, with the First Minister and Prime Minister David Cameron signing a deal on the ballot last October.
Mr Salmond said the Edinburgh agreement gave Holyrood the "unchallengeable authority to organise a referendum".
The question voters will be asked in next year's vote will be: "Should Scotland be an independent country? Yes/No."
Meanwhile, the Scottish Government has already brought forward separate legislation which will allow 16 and 17-year-olds to take part in the crucial ballot.
The First Minister stressed that the referendum will "meet the highest international standards of fairness and transparency".
The Referendum Bill formally allows for elections watchdog the Electoral Commission to have overall responsibility for overseeing the vote.
Mr Salmond said: "Overall the Bill ensures that the referendum will be internationally recognised as a fair, open and truly democratic process."
Mr Salmond said devolution had improved the lives of people in Scotland.
"Police and justice reforms have helped to cut crime and reoffending," the First Minister said.
"We have begun to tackle Scotland's long-standing public health problems through the public smoking ban and legislation for minimum alcohol pricing."
Successive administrations at Holyrood have a history of using their powers for "progressive purposes", he said, pointing to the introduction of free personal care for older people and the abolition of university tuition fees.
"With a measure of independence on health, on education and on law and order, we have all contributed to Scotland being a better place. Let us consider what we could do with Scottish control of the economy, of international representation and security."
Last year Scotland "stood £4.4 billion better off than the rest of the UK", which represents £824 for every man, woman and child in the country, he said.
"We don't have the ability to invest or save that money to the benefit of future generations."
Mr Salmond branded the UK the "sceptics of Europe" and questioned why Scotland should be represented by them in international talks, rather than being "influential and respected" if it was independent.
"On defence, why would this nation of 5.25 million people elect to waste billion on weapons of mass destruction when we still have thousands waiting for a decent home and a life chance?"
Opposition politicians accused Mr Salmond of delay tactics by waiting until now to reveal the proposed date.
Scottish Labour leader Johann Lamont said the SNP's decision to make an occasion out of the announcement was "an attempt to con the people into believing that we have moved a step towards independence when we haven't".
She said: "If the hand of history is on the First Minister's shoulder, I do wish it would give him a shove and he'd get on with it."
The Scottish Government needs to "get on with dealing with the real issues", she said.
"Until then Scotland remains on pause, and what I do not understand is that if leaving the United Kingdom is key to Scotland's prosperity, why he wants Scotland to languish for another year-and-a-half before we get the chance to vote on it," she said.
"The truth is Alex Salmond knows if he held the referendum now he wouldn't just lose it, he would be routed."
The Labour leader called on Mr Salmond to bring forward the publication of the Government's White Paper on the details of independence, which is not due until this autumn.
"Why the delay? If we are to have the transparent debate the First Minister says he wants, why does he not publish his full independence plans now?" she asked.
Liberal Democrat leader Willie Rennie said: "After all the build-up, this looks like one of those occasions where the trailer is more exciting than the movie.
"If he loses will he join me and others to develop a new consensus for more powers for the Scottish Parliament in the UK?"
Mr Salmond said: "The timetable I have laid out is exactly as we said we are going to do."
The September 18 date allows for six months between the passing of the referendum legislation and the vote, while keeping clear of European elections and major sporting events such as the Commonwealth Games and Ryder Cup.
"It is true that the referendum Bill gives people substantial notice of when the referendum is going to be held," Mr Salmond said.
"I think that is a good thing. I think we should take it through parliamentary procedures. I think we should have that discussion and debate."
Scottish Conservative leader Ruth Davidson welcomed the clarity brought by the statement, and called for the level of the independence debate to rise beyond "baseless assertions" and "exaggeration".
She said: "The First Minister knows that the people of Scotland have expectations regarding the level of debate. They also demand and desire information they can trust on which to base this most important of decisions."
Green Party co-leader Patrick Harvie, who backs independence, said a No vote could result in the debate being stymied by "various flavours" of further devolution "with very little chance of ever being implemented".