Video report by ITV News Royal Editor Chris Ship
Prince Harry and Meghan Markle will marry in St George's Chapel at Windsor Castle.
The wedding is set to take place in May 2018, although the exact day is yet to be confirmed.
A spokesman for Prince Harry said the wedding "will reflect who they are as a couple".
The royal family will pay for the wedding, including the church service, the music, the flowers and the reception, Kensington Palace said.
It has not been announced who Harry's best man will be, although many tip it will be his older brother William.
As the couple make preparations for their big day, Ms Markle, a protestant who went to a catholic high school, will be both baptised and confirmed, ready for the religious ceremony.
The American actress, who will become a senior HRH on marrying into the royals, also intends to become a British citizen.
St George's Chapel is the same venue where Harry's father, Prince Charles, was blessed in a civil union with Camilla Parker Bowles in 2005 and where Prince Edward wed Sophie Rhys-Jones in 1999.
Steeped in history, it offers Prince Harry and Meghan Markle a slightly more intimate venue for their nuptials, but one that is still appropriately grand for a royal wedding.
It usually holds around 800 guests compared with the 2,000 capacity of Westminster Abbey where the Duke and Duchess of Cambridge wed in 2011.
Harry's communication's secretary Jason Knauf said Windsor was a "very special place" for Harry, and that he and Ms Markle had spent time there together during their 16-month romance.
He said the couple were delighted to be holding the wedding in the "beautiful grounds of Windsor".
Harry was also christened in the chapel in December 1984 when he was three months old, which, according to Church of England rules, means he can also marry there.
Harry and Ms Markle announced their engagement on Monday, ending months of speculation.
The pair has been a couple since being introduced to each other by a mutual friend in London a year-and-a-half ago.
Kensington Palace also confirmed Harry and Ms Markle will carry out their first official engagement in Nottingham on Friday.
They will visit the Nottingham Contemporary which is hosting a Terrence Higgins Trust World Aids Day charity fair, and also visit Nottingham Academy to meet headteachers taking part in the Full Effect programme..Ms Markle is to become the fourth patron of the Royal Foundation of the Duke and Duchess of Cambridge and Prince Harry.
She will not be continuing her work on gender with the UN or with other organisations, but instead will starting her charity work as a full-time royal afresh.
Ms Markle's belongings are being shipped from her home in Toronto, Canada, to Kensington Palace in London.
Mr Knauf revealed that while one of Ms Markle's beloved dogs Guy was legally allowed to stay with her in the UK, the other - Bogart - would not be joining her.
"Bogart is now living with friends," Mr Knauf revealed.