The Royal Palace officially announced the engagement of the couple on Wednesday morning ending months of speculation.
Prince Albert, 52, began dating the former schoolteacher and backstroke champion, who is 20 years his junior, four years ago, after she visited Monaco for a swimming competition.
No date has yet been set for the wedding, which will be the first of a reigning prince of the Grimaldi family since Albert's father Prince Rainer III married Hollywood actress Grace Kelly in 1956.
Prince Albert acceded to the throne of the Mediterranean principality following the death of his father in 2005. His mother, Princess Grace died tragically in a car accident in 1982.
The Prince had earned a reputation as a playboy prompting fears that he would never settle down and produce a legitimate heir – so much so that in 2002 the constitution was changed to allow one of his sisters' sons to take the throne if he never produced an heir.
He has dated a string of beautiful and famous women including American actresses Brooke Shields and Angie Everhart, and supermodel Claudia Schiffer.
He has also fathered two children, 18 year-old Jazmin Grace Grimaldi with American Tamara Rotolo and six-year-old Alexandre, with Nicole Coste a former Air France stewardess from Togo.
Both children were only recognised officially after the death of Prince Rainier and after paternity tests. Under Monaco's constitution only direct and legitimate descendants born within marriage are allowed to rule.
Royal watchers welcomed the announcement of forthcoming nuptials.
"It's been 30 years since Grace died, 30 years they've been waiting for a first lady, a princess, a dream beauty, glam. And voila!" said Colombe Pringle, editor of French celebrity magazine "Point de Vue", which covers Albert's private life regularly.
