The couple - who have been dating for just over two months - reportedly got engaged after Nick popped the question during a romantic trip to London for her 36th birthday last week.
Nick, 25, reportedly closed down a Tiffany's store in New York City in order to find the perfect ring to propose with.
A source told PEOPLE: ''They are very happy. His friends and family have never seen him like this, and they're all really excited for him. He's definitely very serious about her.''
Speculation mounted about an engagement after director Ali Abbas Zafar announced Priyanka was leaving the Indian film 'Bharat' and hinted that Nick had something to do with the decision.
He tweeted: ''Yes Priyanka Chopra is no more part of @Bharat_TheFilm & and the reason is very very special , she told us in the Nick of time about her decision and we are very happy for her ... Team Bharat wishes @priyankachopra loads of love & happiness for life (sic).''
The engagement comes as a surprise as the pair only started dating in May.
However, things got serious quite quickly for the couple during their whirlwind romance, after they introduced each other to their families.
Priyanka met Nick's parents at his cousin Rachel Tamburelli's wedding in New Jersey last month.
A source said at the time: ''It's a huge deal that Nick brought Priyanka to his cousin's wedding. He's dated a lot over the last couple years but it's never been anything serious, so this is a big step. Nick and Priyanka really like each other, and his family enjoyed getting to know her as well. She fit right in!''
And at the end of June, the actress brought Nick to India to meet her mother Madhu and they also attended Priyanka's friend's wedding.
Meanwhile, Priyanka recently spoke of her wish to start a family.
She said: ''I am a very 'live in the today,' maximum 'live in the next two months' kind of person. But [in] 10 years, I definitely want to have kids. That is, it's going to happen in the next 10 years. Well, hopefully earlier than that. I'm very fond of children and I want to be able to do that.''
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