Prince Harry’s spokesman Jason Knauf said Windsor Castle, Queen Elizabeth II's weekend residence near London, was a "very special place" for Harry and that he and Markle, 36, had spent time there together during their 16-month romance.
Harry, 33, was also baptised in the chapel and it was the place where Charles and Camilla, who were both divorced at the time, received a religious blessing following their civil wedding ceremony in 2005.
"She intends to become a UK citizen. The process for that takes a number of years. She'll retain the US citizenship during that process," Harry's spokesman Jason Knauf told reporters at a briefing.
Prince Harry’s spokesman Jason Knauf said Harry and Markle, who are both passionate charity campaigners, planned to put their personal stamp on the wedding, adding: "They will be making sure it reflects who they are as a couple."
They "want the public to feel part of their day".
The couple will go to Nottingham in central England on Friday for their first joint visit since announcing their engagement on Monday.
'America's loss is our gain'
Kensington Palace, Harry's official residence, said in a statement that the royal family would pay for the wedding and Elizabeth II "had granted permission for the wedding to take place in the chapel".
The exact date of the wedding will be revealed later.
The queen has expressed her approval and tributes continued to pour in on Tuesday from other royals.
During a visit to a school in London, Prince William's wife Kate, the Duchess of Cambridge, said she and her husband were "absolutely thrilled".
"It's a really happy time for any couple," she said.
Prince Charles's wife Camilla, the Duchess of Cornwall, said: "It's brilliant! America's loss is our gain. We're all absolutely delighted."
Being American, a divorcee, an actress, a vocal feminist and of mixed-race heritage, Markle has an unusual background for a member of the British royal family and this has drawn extensive commentary.
"When I looked at the royal family there was no one who looked like me, there was no one I could really relate to," Afua Hirsch, author of the book "Brit(ish)", said on BBC Radio 4's Today programme.
"There is this pressure to always try and make your difference invisible or to say: 'We don't see race, it's fine, it will hopefully go away'.
"She's the antithesis of that... It's a change in narrative as well as just the visual difference with visibly black heritage in the royal family."
St George's Chapel at Windsor Castle. Source: AAP
Charity activities
Markle's father is Presbyterian, her mother is Protestant and she attended a Catholic school.
Royal officials said she would get baptised and confirmed in the Church of England.
The palace said she would also be discontinuing her UN work on gender equality and other campaigning activities as an actress and would instead concentrate on her charity activities as a royal.
In Nottingham on Friday, the two will visit an AIDS charity fair and a school, as well as going on a walkabout to meet members of the public – a tradition for newly-engaged royal couples.
Knauf said Harry was looking forward to going with Markle to Nottingham and introducing her to "a community that has become very special to him."
