Princess Mako, the eldest granddaughter of Japanese Emperor Akihito, will wed a former classmate, the Imperial Household says.
The marriage will further deplete the royal family since female members of the Japanese imperial family have to give up their royal status if they marry non-royals.
The announcement was aired by public broadcaster NHK on Sunday.
Mako, 25, is one of only four royal grandchildren. The other three are her younger sister, Kako, her brother, Hisahito, and Crown Prince Naruhito's daughter, Aiko.
The shrinking royal population, which mirrors the broader aging of Japanese society, has raised concerns that the prince may also be the last.
Ten-year-old Hisahito is one of four heirs to the throne behind Akihito's two middle-aged sons, whose wives are in their early 50s, and Akihito's octogenarian brother, Masahito.
The engagement to Kei Komuro, who works in a Tokyo law office, comes after Japanese lawmakers in June approved a bill to allow Akihito to step down, the first abdication by a Japanese monarch since 1817.
A year ago, the first emperor not to be considered divine said in a rare public appearance that he feared age would make it hard to fulfil his duties. The 83-year-old has had heart surgery and been treated for prostate cancer.
But the legislation, which only applies to Akihito and not future emperors, makes no reference to the controversial topics of whether to revise a males-only succession law or to allow women to stay in the imperial family after marriage.
Conservatives fear doing so would be a first step to letting females inherit the throne.
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