Indonesia plans to move its capital to Borneo island from Jakarta, a crowded, polluted city on the north coast of Java island that is slowly sinking, the president said.
President Joko Widodo said it was urgent that relocation plans commence, although the capital would not physically begin to be relocated until 2024.
The new capital, which does not yet have a name, would be located in Borneo's East Kalimantan province, near the existing Samarinda City and the port city of Balikpapan.
"It is a strategic location at the centre of Indonesia, close to growing urban area," Mr Widodo told a news conference at the Jakarta state palace.
The president said moving the capital would cost 466 trillion rupiah (€29.66 billion), of which the state would fund 19%, with the rest from public-private partnerships and private investment.
The price tag includes new government offices and homes for about 1.5 million civil servants.
The president had earlier this month proposed to parliament to move the country's administrative centre to Kalimantan, the Indonesian side of Borneo island, a region known for rainforests, coal mines, orangutans and home to just over 16 million people.
Environmentalist groups, however, have expressed fears that building a new capital amid swaths of forests in Borneo could destroy the habitats of endangered wildlife.
The jungle island is home to numerous endangered species,including orangutans, sun bears and long-nosed monkeys.
Jakarta is one of the world's most densely populated cities, home to more than 10m people and three times that number when counting those who live in surrounding towns.
The city is prone to floods and is sinking due to subsidence, caused by millions of residents using upground water.
Mr Widodo said the burden on Jakarta and Java island was already too heavy, with the island home to 54% of the 260m population and generating 58% of Indonesia's gross domestic product.
The government will submit a bill, and the result of a feasibility study, to parliament soon to obtain approval for the new capital, Mr Widodo said.
Planning Minister Bambang Brodjonegoro said land acquisition would start in 2020.
Indonesia is not the first country to move its capital.
In 2005, Myanmar's ruling generals moved to Naypyidaw, a town in hills some 320km away from the colonial era capital, Yangon.
In the 1990s, Malaysian leader Mahathir Mohamad built an administrative capital in Putrajaya, about 33km from Kuala Lumpur.
The capital of Brazil was moved from Rio de Janeiro to Brasilia in 1960.
The change has been under negotiations for decades because Rio de Janeiro was overcrowded and was far away from other parts of the country.
During the 19th century, Australia's two largest cities were Melbourne and Sydney. Both cities were contesting to be the capital of Australia.
To keep the peace, the government of Australia opted to establish Canberra as the capital in order to keep the peace.