© Martin Alipaz/EPAClaims of irregularities in the election gave Evo Morales an outright victory
The announcement comes after weeks of unrest over disputed election results, which escalated over the weekend as police forces joined anti-government protests, and the military said it would not "confront the people" who had taken to the streets.
In a televised news conference on Sunday, Morales told journalists he had decided to call fresh elections to "to preserve the new Bolivia, life and democracy".
Morales, who has been Bolivia's president for nearly 14 years, announced he would also replace members of the country's election board. The body has been heavily criticised after an unexplained 24-hour halt in the vote count on 20 October, which showed a shift in favour of Morales when it resumed. The stoppage fed accusations of fraud and prompted an audit of the vote by the Organisation of American States.
But Bolivia's opposition leaders say the call for a fresh vote comes too late. Luis Fernando Camacho, a civic leader from the opposition stronghold Santa Cruz, said the OAS audit shows fraud and that Morales should resign.
Carlos Mesa, runner up in the October election, said Morales and his vice president Alvaro García Linares should be disqualified from participating in new elections as they were behind an attempt to rig the vote.
Other civic groups and political parties voiced agreement with Mesa while Bolivia's trade union federation union, the COB - a one-time ally of Morales - called on the president to resign.
The OAS's preliminary report said it had found "clear manipulations" of the voting system and said it could not verify a first-round victory for Morales.
"The manipulations to the computer system are of such magnitude that they must be deeply investigated by the Bolivian state to get to the bottom of it and assign responsibility in this serious case," it said.
The report added that it was "statistically improbable that Morales had obtained the 10% difference to avoid a second round". Morales had claimed victory before the final count with just enough votes to avoid a run-off, which some polls had indicated he could lose.
"The first round of the elections held on 20 October must be annulled and the electoral process must begin again," the OAS added in a separate statement.
Following violent clashes in El Alto on Saturday between Morales supporters and protesters it was unclear if the call for new elections would pacify the country. Government supporters in the countryside stoned caravans of protesters heading to the demonstrations in La Paz.
Morales, Bolivia's first indigenous leader, and South America's longest-standing contemporary leader, defended his election win but said he would respect the findings of the OAS audit.
He has decried a coup attempt backed by "violent groups" and the opposition to oust him from power and refused to resign amid mounting calls to step down.
At least three people have died in the unrest. The latest reported death was that of a 20-year-old student last week. More than 300 people have been injured in clashes between anti-government protesters and Morales supporters since the election.
[Link]