The couple's first child will be third in line to the throne behind William and his father, Prince Charles leapfrogging the gregarious Prince Harry and possibly setting up the first scenario in which a female heir could benefit from new gender rules about succession.
The palace would not say how far along the 30-year-old duchess is, only that she has not yet reached the 12-week mark.
Palace officials said the duchess was hospitalized with hyperemesis gravidarum, a severe form of morning sickness that affects about 1 in 200 women and can lead to dehydration or worse if left untreated. They said she was expected to remain hospitalized for several days and would require a period of rest afterward.
Until Monday's announcement, the duchess had shown no signs of being with child. She was photographed just last week bounding across a field clad in black high-heeled boots as she played field hockey with students at her former school.
Still, speculation has swirled about when she and William would start a family from almost the moment they were wed on April 29, 2011, in a lavish ceremony at Westminster Abbey.
The attractive young couple is immensely popular with William's easy common touch reminding many of his mother, the late Princess Diana and their child is expected to play an important role in British national life for decades to come.
For months, Kate's every move has been scrutinized for clues about a possible pregnancy from each time she touched her stomach to whether her outfit choices hinted at a baby bump.
In September, tongues wagged over why she might be avoiding alcohol when the duchess opted to toast with a glass of ice water instead of champagne during a banquet in Singapore.
Last week, the rumor mill kicked into high gear when a beaming William accepted a baby outfit from a well-wisher that bore the phrase, "Daddy's little co-pilot."
"I'll keep that," he reportedly said.
The confirmation of Kate's pregnancy caps a jam-packed year of highs and lows for the young royals.
They have traveled the world extensively as part of Queen Elizabeth II's Diamond Jubilee celebrations and weathered the embarrassment of a nude photos scandal, after a tabloid published topless images of the duchess.
Joe Little, managing editor of Majesty magazine, said the news ended a year that saw the royal family riding high in popular esteem after celebrations of Queen Elizabeth II's 60 years on the throne.
"People enjoyed the royal romance last year and now there's this. It's just a good news story amid all the doom and gloom," he said.
In the chilly night air at London's Camden market, concertgoers and shoppers seemed surprised by the news though all agreed that it had been widely anticipated.
"It feels a lot like a Christmas present for the nation!" said Ravian Van Den Hil, a Dutch student studying in London. "It makes me feel quite happy."
Others wondered why Britain continues to spend so much to support the royal family. "I don't think it's a good thing," said Stephen Jowitt as he strolled down Camden High Street. "It reinforces a class system."
The palace said the royal family was "delighted" by the news.
British Prime Minister David Cameron admitted he got a heads-up about the pregnancy, saying he found the news "quite difficult" to keep to himself and expressing confidence the young couple will make "absolutely brilliant parents."
The pregnancy comes after a 2011 decision by the leaders of Britain and the 15 Commonwealth nations endorsing new rules that give girls equal status with boys in the order of succession. Those changes make Kate's pregnancy all the more significant for the royal family, said Ingrid Seward, editor-in-chief of Majesty magazine.
"This is the first child who will be an heir to the throne, whatever sex they are," she said. "It's a new beginning."
Like Kate, William's mother, Diana, also reportedly suffered from morning sickness for months, and was the subject of constant media attention after she became pregnant just four months after her wedding to Prince Charles. "The whole world is watching my stomach," Diana once said.
According to Britain's Department of Health, severe morning sickness most often affects women early in their pregnancy, and is more common in young women, women who are pregnant for the first time and those expecting multiple babies.
Dr. Daghni Rajasingam, a spokeswoman for Britain's Royal College of Obstetricians and Gynaecologists, said women with severe symptoms including dehydration, dizziness and persistent vomiting need to be hospitalized for treatment, including being given fluids intravenously.
"However, this usually only means a few days in (the) hospital," she said in a statement. "The best advice for anyone suffering from (severe morning sickness) is to get plenty of rest and drink lots of fluid." Timeline of Prince William, Kate's romance
Prince William and his wife, Kate, are expecting their first child. Here's some key moments in their romance.
September 2001: William enrolls at St. Andrews University in Scotland, where he meets Kate a fellow art history student.
March 2002: Kate models a transparent dress over black lingerie at a charity fashion show at St. Andrews. It's widely reported that William paid for a front-row seat at the show.
September 2002: William and Kate move into a shared student house with two other friends.
May 2003: The couple are pictured deep in conversation at a rugby match, sparking rumors of a romance.
March 2004: William and Kate's romance becomes public when they are pictured together on a Swiss skiing holiday. Later that year, media reports that they split briefly as William complained of feeling claustrophobic.
April 2005: Kate does not attend the wedding of William's father, the Prince of Wales, and Camilla Parker Bowles in Windsor. Later that year, the pair graduate in the same ceremony at St. Andrews.
December 2006: William is commissioned as an army officer in front of the queen at Sandhurst and joins the Household Cavalry as a second lieutenant. Kate attends the ceremony.
April 2007: British newspapers report that William and Kate have split up. Prince Charles' Clarence House office refuses to comment, but does not deny the report.
July 2007: Media in the U.K. report that William and Kate have rekindled their romance.
April 11, 2008: Kate is seen at William's side at his graduation ceremony from the Royal Air Force, taken as a signal by royal watchers that their relationship is now serious.
October 2010: William proposes to Kate while on a private holiday in Kenya.
November 2010: Clarence House officially announces the engagement.
December 2010: Kate and William attend a charity event to raise money for cancer research, Kate's first official event as a royal fiancee.
April 29, 2011: Prince William and Kate Middleton marry in a lavish ceremony at London's Westminster Abbey. In the months that follow, they travel the globe, often making appearances in honor of Queen Elizabeth II's Diamond Jubilee.
Sept. 14, 2012: A French magazine publishes photos of Kate sunbathing topless at a private house in southern France, prompting a strong condemnation from the royal family.
Dec. 3, 2012: Royal officials announce that Kate is pregnant with her first child, yet hospitalized for morning sickness. Explainer: Why was pregnant duchess hospitalized?
While morning sickness in pregnant women is common, the problem the Duchess of Cambridge has been hospitalized with is not.
In a statement Monday, palace officials said she was hospitalized with hyperemesis gravidarum, a potentially dangerous type of morning sickness where vomiting is so severe no food or liquid can be kept down. Palace officials said the duchess was expected to remain hospitalized for several days and would require a period of rest afterwards.
"It's not unusual for pregnant women to get morning sickness, but when it gets to the point where you're dehydrated, losing weight or vomiting so much you begin to build up (toxic) products in your blood, that's a concern," said Dr. Kecia Gaither, director of maternal fetal medicine at Brookdale University and Medical Center in New York.
The condition is thought to affect about one in 50 pregnant women and tends to be more common in young women, women who are pregnant for the first time, those expecting multiple babies and in non-smokers. Gaither said that fewer than one percent of women with the condition need to be hospitalized.
Doctors aren't sure what causes it but suspect it could be linked to hormonal changes or nutritional problems.
Women admitted to the hospital with hyperemesis gravidarum are usually treated with nutritional supplements and given fluids intravenously to treat dehydration. Dr. Dagni Rajasingam, a spokeswoman for the Royal College of Obstetricians and Gynaecologists, said most women hospitalized with the condition are discharged within several days.
"It depends on how well the woman is keeping fluids down," she said.
If the problem is recognized and treated early, doctors say there are no long-term effects for either the mother or the child. Left untreated, the mother could be at risk of developing neurological problems including seizures or risk delivering the baby early.
Gaither said the condition usually subsides by the second trimester.
"The rest of the pregnancy could be entirely uneventful," she said, adding that pregnant women treated for the condition are usually advised to avoid fatty foods that could aggravate the problem.
Gaither said the duchess would probably be able to meet her usual royal obligations by her second trimester.
"She should be able to meet all her public obligations soon," she said, advising her to take her vitamins and ensure there are no other underlying health problems. "She should just be looking forward to having a healthy little plump person."
The Associated Press