Making the announcement outside his 10 Downing Street residence after briefing the cabinet on the EU reform deal he struck in Brussels yesterday, Cameron said, "The vote would be one of the biggest decisions this country will face in our lifetimes."
He said he would be campaigning to remain in a reformed bloc as the UK would be "safer and stronger" if it remained in the EU.
The Prime Minister warned that leaving the EU would be a "leap in the dark" as he appealed to voters to back his reform deal.
"Those who want to leave Europe cannot tell you if British businesses would be able to access Europe's free trade single market, or if working people's jobs are safe, or how much prices would rise. All they're offering is a risk at a time of uncertainty - a leap in the dark," he said.
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He said if Britons decided to remain in the EU, he would seek continued reforms to address their concerns about job losses and benefit payments to EU migrants seeking work in Britain.
"I do not love Brussels, I love Britain...The question is - will be we safer, stronger and better off working together in a reformed Europe or out on our own?" he said, emphasising that Britain can have "the best of both worlds" if it remains in the EU under the reform deal he with EU leaders.
A string of ministers have come out in favour of remaining - but others will campaign against Cameron.
Priti Patel, the senior-most Indian-origin member of the Cabinet, came out openly in favour of leaving the EU.
The UK employment minister and Cameron's Indian Diaspora Champion joins other senior colleagues like UK justice secretary Michael Gove and Northern Ireland secretary Theresa Villiers.
Most other ministers will campaign to remain, including UK business secretary Sajid Javid, international development secretary Justine Greening and transport secretary Patrick McLoughlin.
referendum planning as soon as the date is officially cleared by the parliament, where it is expected to sail through with a majority.
Cameron on Monday will address the parliament.
Key to the deal with the EU were agreements over welfare payments to migrants, Britain's right to opt-out of the eurozone, and a promise the UK would have stronger sovereign control over laws made in Brussels.
It came after behind-the-scenes talks which stretched from Thursday night and most of Friday, as Cameron and European Council president Donald Tusk struggled to get all the members to agree to Britain's demands.
"Britain will be permanently out of ever-closer union, never part of a European super-state, there will be tough new restrictions to our welfare system for EU migrants - no more something for nothing - Britain will never join the euro and we've secured vital protections for our economy."
"I believe that this is enough for me to recommend that the UK stays in the European Union, having the best of both worlds," he said.
But the brake will be a single-use instrument, which once pulled will last for seven years and then can't be pulled again.
Eurosceptics, including many within Cameron's Conservative Party, dismissed the package as mild and said only withdrawal could restore sufficient powers to the country from Brussels.