Article 12 of the Imperial House Law stipulates that a woman in the Imperial Family shall lose her status in the family if she marries a person outside the family.
Details of their wedding have not been decided, and palace officials say the ceremony is expected sometime around autumn next year.
Mako and fiance Kei Komuro, both 25, said at a news conference that their relationship started when the princess sat behind him at a campus meeting five years ago at Tokyo's International Christian University, where they graduated.
Publicly addressing her engagement for the first time, the 25-year-old said she was first drawn to Komuro's "bright smiles like the sun", and has come to learn he is "a honest, strong-minded, hard worker" with "a big heart".
Princess Mako has a master's degree in art museum and gallery studies and is a researcher at a museum at the University of Tokyo.
Asked about the proposal, Komuro said, "I said to her, "Let's get married" in December 2013". "I believe the two are going to build a wonderful family".
Princess Mako is the first to have an informal engagement among the four grandchildren of the Emperor and Empress. He is the eldest son of Toshikatsu Komuro, a former employee of the Yokohama city government, who died in 2002, and his wife Kayo, 51. The Emperor was quoted as saying, "It's good because the weather is fine today".
Princess Mako and Kei Komuro addressed the press together for the first time on Sunday. This was the first time for Komuro to meet with the Emperor and the Empress.
The news conference followed the Imperial Household Agency's official announcement of their engagement the same day.
Komuro, 25, added that he is also thankful to Mako's parents, Prince Fumihito and Princess Kiko, as well as many others for warmly allowing their courtship over the years. But due to the unfortunate torrential rain that flooded northern Kyushu that month, the royal family chose to postpone the announcement. During the program, Komuro went to the University of California in Los Angeles, while Princess Mako studied at the University of Edinburgh.