The islands' government announced the plan ahead of the anniversary on marking 30 years since the termination of Argentina's 74-day aggressive and illegal occupancy in 1982.
It said it wanted to send a powerful message to the Argentinians that its islanders want to remain British.
The referendum will be regulated by the Falkland Islands government and will take place early next year.
The declaration comes amid growing hostilities between the UK and Argentina surrounding the anniversary remembrances marking the islands' liberation by British forces on June 14,1982.
Argentina still tries to claim independence over the islands it calls the Malvinas, and wants the UK to collaborate over their rule.
Lately,UK ministers have blamed Argentina of trying to impose an "economic blockade" on the islands.
The South American country has been turning away passenger ships displaying the British flag and is taking legal action against five British oil firms researching the island’s coast.
Chairman of the islands' legislative assembly,Gavin Short,said they were holding the referendum "to show the world just how certain we are about it [our future]".
"I have no doubt that the people of the Falklands wish for the islands to remain a self-governing overseas territory of the United Kingdom.
"We certainly have no desire to be ruled by the government in Buenos Aires,a fact that is immediately obvious to anyone who has visited the islands and heard our views.
"But we are aware that not everybody is able to come to these beautiful islands and to see this reality for themselves.
"And the Argentine government deploys misleading rhetoric that wrongly implies that we have no strong views or even that we are being held hostage by the UK military.This is simply absurd."
Further to this David Cameron said it was "absolutely right"that the islanders set out how they intended to "make their voices heard once more".
"And Britain will be resolute in supporting their choice,"he said.
"Next year's referendum will determine beyond doubt the views of the people of the Falklands. Britain will respect and defend their choice.
"We look to all UN members to live up to their responsibilities under the UN charter and accept the islanders' decision about how they want to live."
Foreign Secretary William Hague said:"I hope very much that Argentina, and indeed the whole of the international community, joins the UK in listening carefully to what they have to say."
The Falkland Islands,a rocky archipelago in the South Atlantic Ocean,are 7,780 miles from the UK and 1,140 miles east of South America.The population,estimated at 3,140,primarily consists of Falkland Islanders,the majority of British descent.Other ethnicities include French, Gibraltarian, and Scandinavian.
Immigration from the United Kingdom, Saint Helena, and Chile has reversed a former population decline.
The predominant and official language is English. Under the British Nationality Act of 1983,Falkland Islanders are British citizens.
With the exception of the 74 day invasion by Argentina they have been under British control since 1833.