Abdullah Ocalan also urged his fighters to withdraw from Turkey, in a message read out to cheers during Kurdish New Year celebrations in the city of Diyarbakir.
The Turkish government cautiously welcomed the call, which follows months of talks between the PKK and Turkey.
More than 40,000 people have died in the 30-year fight for an ethnic Kurdish homeland in Turkey’s south-east.
Hundreds of thousands of people were present in Diyarbarkir to hear Abdullah Ocalan’s message.
“The language spoken is that of peace. We should see the implementation,” Turkish Interior Minister Muammer Guler told the state-run Anadolu news agency.
Several previous ceasefire attempts between the two sides have failed.
However, the announcement is potentially an important step towards ending the 30-year long conflict between Kurdish rebels and the Turkish state.
This time, Abdullah Ocalan and Turkish PM Recep Tayyip Erdogan – the two key figures involved – are talking via intermediaries. But the real test of the announcement will be in its implementation.
Abdullah Ocalan is still the final decision-maker among the Kurds, despite the 14 years he has spent in jail. He is serving a life sentence for treason.
The announcement was read out in the mainly Kurdish city of Diyarbakir in Kurdish and in Turkish.
“We have reached the point where weapons should be silent and ideas and politics should speak. A new phase in our struggle is beginning,” Abdullah Ocalan’s message said.
“Now a door is opening to a phase where we are moving from armed resistance to an era of democratic political struggle.
“Now it is time for our armed units to move across the border [to northern Iraq]. This is not an end but a new beginning. This is not abandoning the struggle, but a start to a different struggle.”
It is not immediately clear when this withdrawal will take place – or whether the PKK will ultimately choose to disarm.
Abdullah Ocalan had told Kurdish politicians who visited him earlier this week at his prison on the island of Imrali that his declaration would be “historic”.
In February the PKK (Kurdistan Workers’ Party) leader, who has been in Turkish custody since his capture in Kenya in 1999, called for prisoners to be released by both sides.
The PKK freed eight Turkish soldiers and officials it had held captive in northern Iraq for up to two years.
The PKK launched its armed campaign in 1984 and is regarded by Turkey, the US and EU as a terrorist organization. Last year saw some of the heaviest fighting in decades.
The organization rolled back on its demands for an independent Kurdish state in the 1990s, calling instead for more autonomy.
Reports say the PKK wish list now includes greater constitutional and linguistic rights for Kurds, as well as an easing of pressure on Kurdish activists.
The government has also not dismissed speculation that Abdullah Ocalan could be moved to house arrest.
On the eve of the truce call, Recep Tayyip Erdogan condemned a number of blasts in the capital blamed on a left-wing group which opposes the talks with the PKK. He promised to push ahead with “extremely critical and sensitive” peace efforts, which have been going on since October.
Abdullah Demirbas, a district mayor in Diyarbakir, told Reuters news agency there would be more attempts to sabotage talks, but this was a last chance for peace.
“The PKK, Ocalan and the government must be brave… There is massive social support for this process.”
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