The announcement was made by BJP chief Rajnath Singh after a meeting of the party's Parliamentary Board which was skipped by L K Advani who expressed "anguish" over the way the party functioning.
Except L K Advani, the meeting of the 12-member Board was attended by other leaders like Sushma Swaraj, Murli Manohar Joshi, Arun Jaitley and Nitin Gadkari.
The decision on Narendra Modi came on a day of fast-paced developments and back-to-back meetings and last minute efforts to bring around L K Advani, Joshi and Swaraj.
Making the announcement, Rajnath Singh said the decision had been taken by the Parliamentary Board as per the party's tradition.
The party had announced its Prime Ministerial candidate in 2009 elections also, he noted at a press conference here.
Modi, who will turn 63 next Tuesday, said he will work tirelessly to ensure that BJP wins the 2014 elections.
Giving a slogan "nayi sonch, nayi ummeed" (new thinking, new hope), he said the party will work for good governance and development while fighting against corruption and price rise.
Touching a sour note, an upset Advani released a letter written to the party chief almost at the same time when announcement about Modi was made.
"This afternoon when you had come to my residence to inform me about the Parliamentary Board meeting, I had said something about my anguish as also my disappointment over your style of functioning," the BJP veteran said in the two-para letter.
"I had told you that I will think whether I should share my thoughts with other Board members or not. Now I have decided that it is better that I do not attend today's meeting," he wrote.
Modi, flanked by Rajnath Singh, Joshi, Swaraj, Jaitley, Ananth Kumar among others, said the country is going through a "crisis" and the countrymen should support BJP to emerge from this situation.
The Gujarat strongman sought blessings of crores of people from Kashmir to Kanyakumari to help BJP win.
He thanked party leadership and workers for reposing faith in him. He also expressed gratitude to NDA allies for supporting him through telephone calls.
Soon after the announcement, Modi went to meet Advani to seek his "blessings".
Advani initially appeared willing to attend the Board meeting but changed his mind at the last minute, sources close to him said.
The BJP veteran had conveyed his reservations about announcing Modi's name at this juncture. He had suggested that the BJP chief ministers should be consulted on the issue and the party should wait till the forthcoming Assembly elections to Madhya Pradesh, Chhattisgarh, Rajasthan and Delhi are over.
Advani was of the view that making Modi the Prime Ministerial candidate will put issues like price rise and corruption- on which the BJP has attacked the Congress- on the backburner and make the controversial leader the issue.
Rajnath Singh said the decision was taken keeping in view the mood and aspirations of the people. He said the decision was taken "unanimously".
He said Advani is a respected leader and will continue to be respected. "We will keep seeking his guidance," he said.
Joshi and Swaraj, who too were said to be having reservations to Modi's projection at this juncture, changed their stand to join the majority.
Significantly, Swaraj cancelled her plan to visit Haryana this morning to attend the Board meeting.
Earlier, Gadkari met Rajnath Singh to discuss the issue. Later, Gadkari met Advani to persuade him on Modi's name.
Swaraj and Ananth Kumar also joined the meeting.
Joshi was asked to return to the capital by a special flight from Sagar, Madhya Pradesh where he had gone to attend a party programme.
Modi got a shot in the arm today when NDA allies Shiv Sena and Shiromani Akali Dal extended their support to him for the PM candidate post.
* Narendra Modi to meet L K Advani to seek his blessings: Rajnath Singh.
* BJP Parliamentary Board chose Narendra Modi as its PM candidate as per party tradition: Singh.
* I thank all BJP workers and leaders for this opportunity, says Narendra Modi.
* Leaders of all NDA allies have supported Narendra Modi's candidature: Rajnath Singh.
*I will not leave any effort to make BJP victorious in 2014 polls: Narendra Modi.
*Narendra Modi thanks NDA partners for their greetings on becoming BJP's PM candidate.
*We will fight against corruption, price rise and work for good governance and development: Narendra Modi.