The couple says the wedding will likely be next spring or summer, and palace officials say it will happen in London, but aren't saying where.
Westminster Abbey or St. Paul's Cathedral, where William's parents Prince Charles and Princess Diana married in 1981, are considered the front-runners.
It was too early to estimate its cost or how much the taxpayer will have to stump up - a touchy issue at a time of widespread budget cuts and austerity measures across Britain.
The spokesman for William's office said "the couple are mindful of the current economic situation." He stressed the wedding would not be a state occasion - unlike the wedding for Charles and Diana - because William is not the sovereign or the heir to the throne.
The biggest fashion decision Middleton faces will be her wedding dress.
Deborah Joseph, editor of Brides Magazine, said Middleton will face substantial pressure to choose an English designer, and Hilary Alexander, fashion director of The Telegraph newspaper, expects the princess-to-be to come up with a surprising choice.
One easy bet, however: Middleton is likely to use much softer fabric, like tulle or organza, than the stiff taffeta Diana used.
The couple had waited so long that Middleton was dubbed "Waitey Katie." But the so-called commoner is having the last laugh, finally getting the royal proposal the whole world is talking about.
The engagement was kept secret for weeks, but Tuesday's announcement ended months of frenzied speculation. Prince William reportedly popped the question three weeks ago while vacationing with Middleton in Kenya.
Insiders say the two had been discussing marriage for some time, but the prince just wasn't ready to wed. Now, his girlfriend of more than eight years proudly displays the ring that comes with sentimental value - the diamond-and-sapphire creation was Princess Diana's engagement ring.
The prince said passing it along to his beloved is a way to make his mother part of their big day.
"I would have loved to have met her, and she was an inspirational woman to look up to," Middleton said.
Prince William said nobody was trying to fill Princess Diana's shoes.
"It's about making your own future and your own destiny, and Kate will do a very good job of that," he said.
Many say Middleton brings youth and glamour to a monarchy tarnished by divorce and scandal, but marrying the second in line to the throne won't be an easy road, and critics are already sizing up William's choice. The inevitable comparisons to Diana are already under way.
"People feel that there can never be anyone like that again. She was the most extraordinary icon of the latter part of the Twentieth Century. Kate Middleton is not going to be that," said Marina Hyde of UK newspaper the Guardian.
While some focus on the comparison, most Britons say they're delighted with Middleton, and news of the royal celebration is good for the country.
There is already talk of royal babies. Kate and William both say they want children, just not now.
The Associated Press contributed to this story.