The You're Beautiful pop singer is said to have proposed to legal consultant Sofia over the Christmas holidays.
"Everyone is talking about it," a friend of the couple told the Mail Online. "We were sort of expecting it but it is still great news."
The former army officer's sister Daisy introduced him to Sofia at the beginning of last year.
The 39-year-old previously said of their relationship, "What I will say is that I'm very happy at the moment with Sofia.
"It takes a strong person to be able to deal with somebody working in music. It's hard when you're with somebody and you become embroiled in something just because you were seen standing next to someone else.
"It takes a tough person to deal with that and I'm lucky to have her."
Sofia, 29, graduated from Edinburgh University in law and now works in London.
James previously dated model Petra Nemcova.
See gallery of celebrities who have got engaged over the Christmas holidays