The proposed location in the province of East Kalimantan - near the regional cities of Balikpapan and Samarinda - is in the geographical centre of the Southeast Asian archipelago, and an area where the government already owns about 180,000 hectares of land, President Joko Widodo said on Monday (Aug 26).
The relocation is set to start from 2024.
READ: Leaving Jakarta - Indonesia accelerates plans for 'green, smart' capital in the middle of Borneo wilderness
Here are some other countries that have moved its capitals or seat of government over the years:
Malaysia moved its seat of government in 1999 to Putrajaya from Kuala Lumpur, which remains its national capital where the king resides, as well as the country's commercial and financial centre. Envisioned by Dr Mahathir Mohamad during his first stint as prime minister, the move was aimed at relieving Kuala Lumpur's growing urban congestion.
Myanmar shifted its capital from Yangon to central Naypyidaw in the mid-2000s. The sprawling city has almost six times the land area of New York. It boasts a replica of Yangon's Shwedagon Pagoda and a 20-lane highway, although they're often empty as the city is sparsely populated.
Australia's purpose-built capital Canberra became official in the late 1920s as a compromise between rivals Sydney and Melbourne, which both dwarf its modest population of about 400,000.
Pakistan moved its seat of government from Karachi on the far southern coast to the purpose-built city of Islamabad in the 1960s. The new capital, developed by a Greek architect, is known for its greenery and quality living standards.
Kazakhstan's capital Astana - recently renamed Nursultan after its ex-president - became the country's administrative centre in 1997, taking the crown from Almaty. Designed by a Japanese architect, the city is known for its futuristic skyline.
Egypt is planning to move to a new administrative capital being built in the desert about 45km from the centre of overcrowded Cairo, a city of nearly 20 million.
Africa's most populous country moved its capital in 1991 from teeming Lagos to Abuja, a planned city built in the 1980s that was more central and less congested.
Brazil started moving its capital to Brasilia from Rio de Janeiro in 1960. Located in the country's vast Amazon interior, it was acclaimed for large-scale modernist architecture and designated a UNESCO World Heritage Site in 1987.