Here are top 10 points from PM Modi's announcement:
"I am pleased to announce that a significant decision has been taken to follow the directives of the Supreme Court. The cabinet has prepared a detailed plan for the construction of Ram Temple at Ayodhya. My government has decided to set up a trust called Sri Ram Janmabhoomi Teertha Kshetra, which will take decisions independently on the construction of a Ram temple and related issues," PM Modi said in the Lok Sabha.
The entire 67 acres around the site had been handed over to the trust, the Prime Minister said, "to maintain the sanctity of Ayodhya and for the construction of the temple, keeping in mind the needs of crores of devotees".
PM Modi said the decisions today were in line with the Supreme Court's historic verdict in November that the land claimed by both Hindus and Muslims in Ayodhya belonged entirely to the deity Ram Lalla or infant Lord Ram. The court had also said five acres of land should be given for a mosque at a prominent site in the holy town to the Sunni Waqf Board.
Land for a mosque has been assigned about 25 km from the Ayodhya temple complex and even outside the town, but within the Ayodhya district.
The Prime Minister came to the Lok Sabha straight from a cabinet meeting this morning to make the announcement, wearing a grey jacket and saffron muffler. Chants of "Jai Shri Ram" rose from BJP MPs, who had reportedly been asked to be present in the house.
"Aaieeye, Aaieeye (come, come). Let us all support construction of grand Ram Temple in Ayodhya," PM Modi said, to desk-thumping and more shouts of "Jai Shri Ram" from the government benches. Some BJP MPs were seen raising their fists in the air with triumph.
"I salute the 130 crore people of India," said the PM, adding that in India, everyone, be it Hindus, Muslims, Sikhs, Christians, Buddhists, Parsis or Jains, was part of one "broad family". "Development must take place for every member of the family. Our government is moving forward with the mantra of 'sabka sath sabka vikas' so that everyone is happy," the Prime Minister said, his words significant at a time protests are raging against the Citizenship (Amendment) Law (CAA), which helps non-Muslims from Pakistan, Afghanistan and Bangladesh become citizens if they escaped religious persecution and entered India before 2015. Protesters fear the CAA, along with the National Register of Citizens (NRC), will be used to target undocumented Muslims.
Sources say no political party is part of the temple trust. Home Minister Amit Shah tweeted: "Ram Janmabhoomi Teertha kshetra will have 15 trustees including one Dalit. For this unprecedented decision to strengthen social equality, I congratulate PM Modi."
The Supreme Court had given the government a three-month timeline to set up a trust for a temple at the site where the 16th century Babri mosque stood before it was razed by Hindu activists in December, 1992. The Election Commission said there was no violation as the Supreme Court's deadline for the trust is February 9 (Sunday, a day after voting in Delhi) and the government has to file a compliance report before this.
The announcement comes at the height of a polarizing campaign in Delhi, with the BJP and Arvind Kejriwal's Aam Aadmi Party (AAP) sparring over the Shaheen Bagh protest against CAA and NRC. Mr Kejriwal has accused the BJP, especially Amit Shah, of trying to polarize Delhi voters as they had nothing else to offer. The construction of a grand Ram temple in Ayodhya has been on the BJP's manifesto for over two decades.