Bolivian President Evo Morales announced that he was going to call new elections after international observers questioned the validity of his victory last month.
The Organization of American States (OAS), which monitored the elections, called for the cancellation of the result.
Morales' announcement comes after weeks of anti-government protests against reported irregularities and fraud.
The president, elected for the first time in 2006, denied any wrongdoing and ignored calls for resignation.
In his announcement on Sunday, he also announced that the country's electorate would be reorganized before the polls, with Parliament elected by its members.
- Why protesters are on the streets of the world
Mr. Morales, Bolivia's first indigenous president, told the press that he had made the decision to "reduce all tensions".
"We all have the obligation to pacify Bolivia," he said.
What did the OAS say?
In its preliminary report released on Saturday, the OAS said that it had discovered "clear manipulations" of the Bolivian electoral system and that it could not verify the outcome of the October 20 race.
During the audit, physical records were discovered with falsified modifications and signatures, as well as evidence of large-scale data manipulation.
The international body concluded that it was unlikely that Mr. Morales had won with the 10% margin required for victory. He recommended the creation of a new electoral commission before the holding of new elections.
Why was there opposition to the election result?
Bolivia has been shaken by demonstrations, strikes and roadblocks since election night.
At least three people died in clashes. The mayor of a small town was also attacked by protesters earlier this week, who dragged him barefoot through the streets, covered him with red paint and cut him off by strength.
Tensions first became evident after the count of the results was inexplicably interrupted for 24 hours.
The final result gave Morales a little more than the 10% advance he needed to win, giving him a fourth consecutive term.
Carlos Mesa, finalist of the election, asked Friday at the Bolivian Congress to adopt an emergency bill in order to prepare new elections.
During an escalation of protests on Saturday, opposition supporters invaded two state-run news outlets in La Paz and forced them to leave the airwaves.
On the same day, a number of uniformed police also joined crowds of protesters in several major cities.
Morales condemned the seizure of television and radio channels, but the Bolivian Minister of Defense said that there was no plans to deploy the army to suppress the " mutiny "of the police.
The Bolivian armed forces have also called for the crisis to be resolved by democratic means.
Elsewhere in the region, leaders of Venezuela, Cuba and Mexico – and Argentina's President-elect Alberto Fernandez – have expressed their support for Morales.
"We demand the respect of the will of the Bolivian people who reelected him president".