Catalan regional government head Artur Mas said the vote, which the Spanish government says would be unconstitutional, would ask two questions: "Do you want Catalonia to be a state?" and "Do you want that state to be independent?"
Calls for independence in Catalonia, a wealthy industrial region of northeastern Spain which accounts for a fifth of the country's economic output, have grown as a prolonged Spanish recession and cuts in public spending have hit the area, creating a headache for Prime Minister Mariano Rajoy.
Mas argued that there was a way for the vote to be held legally, but within minutes of his statement, Spanish Justice Minister Alberto Ruiz- Gallardón said the vote could not take place because Spain's constitution would not allow it.
Rajoy later reiterated that he saw no elbow room on Madrid's stance against the referendum.
"As prime minister I have sworn to uphold the constitution and the law and, because of this, I guarantee that this referendum will not happen," Rajoy said during a joint news conference with European Council President Herman Van Rompuy.
Van Rompuy lends a hand
"Any discussion or debate on this is out of the question."
Van Rompuy, who was in Madrid for talks with Rajoy, told the news conference he was "confident" Spain would remain united.
He warned that any new independent state would have to apply to become a member of the European Union, subject to ratification by all member states.
Van Rompuy also said that in his own country Belgium, he has been against separatism. Flanders, his native region, has seen a surge of separatism in recent years, first spearheaded by a radical force, Vlams Belang, and more recently by the nationalist N-Va, which advocates a gradual secession from Belgium.
The ambiguous wording of the proposed first question: "Do you want to be a state?" was aimed at satisfying parties who wanted more independence from Madrid without separating altogether and at attracting as many voters as possible, political analysts said.
The Catalan government has been talking about a possible referendum since late last year and a Metroscopia poll in newspaper El País last month showed that 46% of Catalans favour separatism versus 42% who wish to remain within Spain.
However, the same poll also showed that Catalans, if offered more autonomy, would prefer it over outright independence.
Rajoy's People's Party and the main opposition Socialists have both dismissed Catalan breakaway rhetoric, which has become more voluble against a backdrop of similar movements in Europe. In Scotland, a vote to decide on independence from the United Kingdom will be held on 18 September next year.
Both of Spain's mainstream parties have lost support in Catalonia as tensions with Madrid have risen. Conversely, rejecting independence for Catalonia - 15% of Spain's electorate - has backing in the rest of Spain.
But stopping a vote taking place could prove tricky, one political analyst said.
"I think they will call a referendum and, whatever its result, the Catalans end up winning ... because, although the result is not binding, it is a very powerful weapon with which to exert pressure," said Rafa Rubio, who teaches constitutional law at Madrid's Complutense University.
Catalonia has strong historic and cultural roots and its own language, aside from Spanish. It already has a high degree of autonomy, but wants more say over taxes and public spending.
"Rajoy is worried, but his character is to leave things for time to deal with, and this is an issue which over time continues to grow and worsen," Rubio said.
The parties who agreed the wording of the referendum represent 64% of the Catalan regional assembly.
"Mas [...] is leading Catalonia down a blind alley," said Alfredo Perez Rubalcaba, leader of the Socialist party.