He told thousands of pilgrims gathered in St Peter's Square for weekly prayers that he will use the May 8-15 visit to pray "for the precious gift of unity and peace for the Middle East and for all of humanity."
The Vatican said he would celebrate masses in Jerusalem, Bethlehem, Nazareth and Amman and meet Palestinian and Israeli leaders as well as Jordan's King Abdullah and Queen Rania.
The trip comes after controversy which surrounded the lifting of the excommunication of ultra-conservative British bishop Richard Williamson, who had publicly denied that Jews were killed in Nazi gas chambers. The move, aimed at healing a rift within the Catholic Church, soured relations with Israel.
Benedict is expected to begin his visit in the Jordanian capital from May 8-11, which will include a meeting with Catholic bishops from Iraq as well as prayers in a mosque.
The German pope will then visit Jerusalem, which apart from containing some of Christianity's holiest sites, is the holiest city in Judaism and the third-holiest in Islam.
He will celebrate masses in the town of Nazareth in Israel, where according to Christian tradition, Jesus Christ grew up, and the West Bank town of Bethlehem, Jesus' birthplace.
Preparations for the visit have been underway for months, but the Vatican traditionally makes the formal announcement of a papal visit only within a couple of months of the event.
It will be Benedict's first visit to the Holy Land since becoming pope in April 2004. His predecessor, Pope John Paul II, visited the region in 2000.
Benedict will make his first trip to Africa from March 17-23, visiting Cameroon and Angola. He is also expected to visit the Czech Republic in September.
The announcement was immediately welcomed by Israeli President Shimon Peres and Palestinian president Mahmud Abbas.
"The pope will be a distinguished guest welcomed by all parts of society," said Peres during a visit to northern Israel. "This is an exciting and extremely important event that brings a spirit of peace and hope with it."
Abbas said Palesitnians hoped the visit "can be an opening for love and goodwill and spread peace in the land of peace," adding that he has already appointed an official committee to prepare for the visit.
Benedict has faced strong criticism since January 24 when he lifted Williamson's excommunication, and that of three other members of a breakaway fraternity that rejected the Vatican reforms of the early 1960s.
Among the reforms was a declaration, Nostra Aetate, which ended a Church doctrine under which the Jews were blamed for the death of Jesus Christ.
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(Source: CTHUS)