When asked about the oval blue 18-carat sapphire and diamond ring, William said: "It was my way of making sure my mother didn't miss out on today."
Diana - who was divorced from Charles - died in 1997 in a Paris car crash and William and his brother Prince Harry often pay tribute to her.
William and his new fiancee did a photo call at St James' Palace in London, where they showed off the stunning ring and Kate spoke about joining Britain's Royal Family.
She said: "It's quite a daunting prospect but hopefully I'll take it in my stride. William is a great teacher."
William's father Charles also spoke of his joy at the engagement and joked it had taken a long time as they had been together for eight years.
He said: "I'm thrilled, obviously. They've been practicing long enough."
Kate's parents Michael and Carole said they were "absolutely delighted" and "thrilled" by the news.
Her father said: "We have got to know William really well, we all think he is wonderful and we are extremely fond of him.
"They make a lovely couple, are great fun to be with and we've had a lot of laughs together. We wish them every happiness for the future."
