Interim President Abdelkader Bensalah made the announcement saying polls are the only solution to the country's crisis.
Algerians will head to the polls on December 12, the country's interim president said, as weekly protests have continued in the north African country for more than six months.
Abdelkader Bensalah made the announcement during a televised speech on Sunday, calling on Algerians to make December 12 "an historic day to make the dreams of our people concrete".
Weekly mass demonstrations forced veteran President Abdelaziz Bouteflika to resign in April, leaving Algeria in constitutional limbo and facing a stand off between protesters and the army-backed government.
"Elections are the only democratic solution to the crisis," Bensalah said.
The authorities had cancelled an election previously planned for July 4, citing a lack of candidates, amid mass protests demanding the departure of the rest of the old guard including Bensalah and Prime Minister Noureddine Bedoui.
But army chief Lieutenant General Ahmed Gaid Salah has repeatedly called for an election as soon as possible, despite the opposition and protesters rejecting a vote.
Earlier on Sunday authorities named an independent election authoirty to organise the vote to replace the interior ministry, which has been in charge of elections over the past years.
"This (election) body is a concrete response to demands from our people including those seeking a radical change of the system," Bensalah said, in apparent reference to protesters who have been staging weekly demonstrators since February 22.
"These changes confirm that the state will go ahead to meet all demands," he said.
The authorities had sought to calm demonstrators by starting the prosecution of Bouteflika's allies for suspected involvement in corruption cases.
Two former prime ministers, two former intelligence chiefs, eight ministers and several prominent businessmen have been put in custody after being questioned by judges as part of anti-graft investigations.
Meanwhile, police have increasingly cracked down on protesters. More than two dozen arrested during Friday's march were jailed, their lawyers told the TSA online media outlet.
Karim Tabou, 51, a well-known figure in the movement, was jailed on Friday on charges of undermining the military, causing concern among opposition politicians and protesters.
Numerous other citizens have been jailed since the February 22 start of the peaceful demonstrations aimed at ridding Algeria of the Bouteflika era, mired in corruption. Among those jailed are people waving regional flags and, shocking for many, a veteran of Algeria's independence war with France that ended in 1962.
Protesters now demand that "political prisoners" be set free and many chant for the army chief to leave.
PUKmedia \ Al Jazeera