In a long-awaited landmark speech, Mr Cameron set out the proposals for a nationwide vote to be held by the end of 2017 so long as he is returned as PM.
Mr Cameron said he would seek a return of certain powers from Brussels to Westminster before campaigning to stay in the EU on the new terms.
Ultimately, though, he confirmed that the choice would be made by the public. "It is time for the British people to have their say," he said.
"It is time to settle this European question in British politics. I say to the British people: this will be your decision."
Unsurprisingly, the news was welcomed by most Eurosceptics who have long campaigned for a vote, but UKIP leader Nigel Farage said he would have only been satisfied by an immediate referendum.
Nevertheless, it must be said that Mr Cameron has made a clever move politically, and it is one which has almost certainly put Labour and UKIP on the back foot.
Even LabourList editor Mark Ferguson has conceded that Ed Miliband's hasty response in ruling out a referendum could mean that he and his party are perceived as "the status quo-endorsing, Europhile democracy haters".
Meanwhile, the UK Polling Report blog has recalled the popularity boost which Mr Cameron received in December 2011 when he used his veto over proposed treaty changes.
There are some cautionary words on the same site, however. Europe is not actually an issue which is particularly salient with the public, ranking behind other topics such as "the economy, pensions, crime, health and so on".
Also, the fact that, on the very next day, the Chancellor George Osborne announced his spending cuts would have to continue, coincidentally, until 2017 will not give the Tory vote much chance to bounce.
Indeed, the struggling economy means there remains a fair chance that Mr Cameron may only be a one-term Prime Minister, unable to follow through on his promise.
Even if he is re-elected, it is not clear exactly what settlement he would be able to secure as both France and Germany have warned Britain that it simply cannot "cherry pick" its EU membership.
But, despite these difficulties, it was no surprise to see Mr Cameron face this challenge head-on.
The issue of Europe has haunted the Conservatives for decades, so much so it effectively brought down the curtain on the premierships of Margaret Thatcher and John Major.
During the Cameron ministry too, it has lingered in the background like a bad smell and the rift has continued. For now, though, both sides seem to have been placated.
Eurosceptic Tories will be pleased that they finally have a goal to aim for, and that the UKIP vote against them should be blunted.
Meanwhile, BBC political editor Nick Robinson notes that pro-Europeans "were relieved by the pragmatic tone of much of the rhetoric".
That rift in the Conservative party remains, though - and it cannot be underestimated just how big a political risk Mr Cameron has taken with his promise to hold a referendum. Certainly, Mr Cameron will have to hope history does not repeat itself.
For, when Labour Prime Minister Harold Wilson held a similar vote in 1975, the fall-out caused a schism in the party which would eventually leave it in the electoral wilderness for years.
Defeat to the Conservatives in 1979 sent Labour lurching further to the Left, and this caused centrist pro-European members to set up the Social Democratic Party, which would subsequently merge with the Liberals to form the Liberal Democrats.
Of course, it is highly unlikely anything as dramatic as that will happen to the Conservatives, especially while they remain in power.
However, it could still be the case that Mr Cameron will be forced again to take on the Eurosceptics in his own party, depending of course on how successful the election and his negotiations are.
Finally, it must be said that the views of the British public on EU membership are unpredictable, to say the least.
Back in that vote in 1975, voters overwhelmingly opted to stay in Europe by a margin of two to one. But who knows, though, what the outcome will be in 2017 if we do indeed get the chance to vote?
Indeed, bearing in mind the anticipated one-eyed Eurosceptic stance from the likes of the Sun and its ilk, it will also be worth asking: just how informed will the decision actually be?
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