"The Prince and Princess of Monaco are happy to confirm they are expecting twins... at the end of the year," the palace said in a statement, confirming a report earlier this week in Hello! magazine.
Charlene, 36, is a Zimbabwe-born former Olympic swimmer who married Albert, 56, in 2011.
The twins, who will replace Albert's sister Caroline as the next in line to the Monaco throne, will be Charlene's first children and the grandsons or granddaughters of Hollywood superstar Grace Kelly.
Albert, who succeeded his father, Kelly's husband Prince Rainer, in 2005, already has two children from affairs during his days as one of the world's most eligible bachelors.
His US-born daughter Jazmin - from a fling with former waitress Tamara Rotolo - recently graduated from university in the United States.
The prince denied being her father for years before DNA tests proved otherwise when she was a teenager.
The prince also has a younger son, Alexandre Coste, from an affair he had with Nicole Coste, a former Air France hostess.
Under Monaco's inheritance laws, neither of the two recognised illegitimate children have any claim to royal titles or to be considered as heirs to Albert.
They do however have legal rights to a share of his huge personal fortune, estimated by Forbes magazine to exceed one billion dollars.
Albert and Charlene's relationship has repeatedly been reported to be on the verge of collapse since reports suggested she had attempted to flee Monaco just days before their wedding, distraught at rumours that details of a third illegitimate child were about to surface.
It was widely reported that the couple spent at least part of their honeymoon in separate hotels and regular pictures of the princess looking gloomy since then helped to fuel reports that she was depressed.
A glamorous blonde who has retained her swimmer's physique, Charlene hails from a middle-class Zimbabwean family with German roots who relocated to South Africa when she was 11.
She swam for her adopted country in the 4 x 100m medley relay team at the Sydney Olympics in 2000.
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