The couple confirmed rumours in a statement to Britain’s Press Association, saying they planned to marry in 2017.
The statement came as Middleton appeared in photographs with a diamond engagement ring on her left hand as she left her London home.
Matthews got down on one knee while they were visiting the picturesque Lake District and proposed to the 32-year-old Middleton on Sunday. The couple have been dating less than a year.
Her elder sister, the former Kate Middleton, and Prince William said they were “absolutely delighted,” by the news, Kensington Palace said.
“They make a wonderful couple and we wish them every happiness,” said her father, Michael Middleton.
Middleton played a prominent role in the 2011 royal wedding of her older sister Kate and Prince William.
Pippa leapt into the public consciousness in 2011 when she was bridesmaid to her sister in a figure-hugging Alexander McQueen dress at the royal wedding.
Mr Matthews is the elder brother of former Made In Chelsea star Spencer Matthews.