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.
Hundreds of thousands were there to hear 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.
Several previous ceasefire attempts have failed.
But the BBC's James Reynolds in Istanbul points out that this time Ocalan and Prime Minister Recep Tayyip Erdogan - the two key figures involved - are talking via intermediaries.
Our correspondent says 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," 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."
Our correspondent says it is not immediately clear when this withdrawal will take place - or whether the PKK will ultimately choose to disarm.
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 organisation. Last year saw some of the heaviest fighting in decades.
The organisation 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 Ocalan could be moved to house arrest.
On the eve of the truce call, Mr 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."
In Diyarbakir members of the crowd spoke of their hopes for an end to conflict.
"We are waiting for peace, for better days. We don't want clashes any more," a woman said.
Source: BBC News
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