No date or place for the wedding was set, but Andrew said he hopes that it will be in the summer at Westminster Abbey. Both the prince and his future wife are 26 years old.
During a televised interview at Buckingham Palace, Andrew and Ferguson kissed for photographers and giggled frequently. The bride-to-be displayed her engagement ring--a ruby encircled in diamonds on a gold band.
Asked how he felt about becoming a married man, Andrew said he was "over the moon." After a quick glance from Ferguson, he added: "We are both over the moon, and will be even more so when this is over."
The prince said he proposed to Ferguson "some weeks ago" but put off an announcement until his mother returned from a tour of Nepal, New Zealand and Australia.
"We asked the Queen for permission last weekend at Windsor Castle when she returned," said Andrew, who is fourth in line for the British throne. Under Britain's Royal Marriage Act of 1772, the monarch's consent is required before those in the line of royal succession can be married.
Both Andrew, a Royal Navy lieutenant and helicopter pilot who served in the 1982 Falklands War, and Ferguson, a sales executive in a London graphics and printing firm, said they will continue their careers after their marriage.
"I have absolutely no plans to change the course of my career because I am married," the prince said. "And in any case, Sarah has told me in no uncertain terms not to change my plans at least for the foreseeable future."
Ferguson, whose father, Maj. Ronald Ferguson, is polo manager for Andrew's brother, Prince Charles, said she thought her ties with royalty would help her as Andrew's wife.
"Prince Andrew and I will work as a team, but the fact that I know the ways of the court will certainly help me cope a lot easier than perhaps other people," she said.
After their marriage, Ferguson will be known officially as Her Royal Highness, the Princess Andrew. She said receiving the title will be "a great honor" and said there is "much to do to carry it out."
Andrew and Ferguson, a freckled, bouncy socialite known as "Fergie," were first seen together in public at the Royal Ascot horse races last June.
Andrew said, "We have known each other since we were 4 or 5, but we only really noticed each other fairly recently."
Asked what they liked about each other, she replied: "Wit, charm . . . looks."
Andrew said: "The same . . . and the red hair."