President Sauli Niinisto and Prime Minister Sanna Marin made the announcement at a joint news conference at the Presidential Palace in Helsinki on Sunday.
“The president and the government’s foreign policy committee have agreed that after consulting parliament, Finland will apply for Nato membership,” president, Sauli Niinistö, told a press conference.
“A protected Finland is being born as part of a stable, strong and responsible Nordic region.”
Mr Niinisto went on to hail it as “a historic day” for Finland, adding: “A new era is opening. A lot has happened since the day Russia invaded Ukraine. We gain security, and we also share it. It’s good to keep in mind that security isn’t a zero-sum game.”
The Finnish Parliament is expected to endorse the decision in coming days, but it is considered a formality.
A formal membership application will then be submitted to Nato headquarters in Brussels.
Neighbouring Sweden is set to decide on its Nato stance on Sunday.
According to reports Mr Niinistö called Putin on Saturday to inform him his country aimed to join Nato.
Russia has repeatedly warned Finland and Sweden against joining Nato, and Putin is said to have responded to Niinistö’s call by stating that Nato membership “would be a mistake, since there is no threat to Finland’s security”.