The newly elected leader says the public inquiry will be a top priority of his Liberal government.
He's calling for a total renewal of the relationship between Canada and its Aboriginal people.
Canada's First Nations peoples make up 5 per cent of the population but have higher levels of poverty and addiction and are far more often victims of crime than other Canadians.
Canadian Prime Minister Justin Trudeau says his government is committed to repairing the partnership with the country's Aboriginal people.
Mr Trudeau made the announcement to hundreds of chiefs at an Assembly of First Nations meeting.
"I know that renewing our relationship is an ambitious goal, but I am equally certain that it is one that we can and will achieve if we work together."
The national inquiry on the murder and disappearance of hundreds of Indigenous women in recent decades is a measure long opposed by former Prime Minister Stephen Harper.
Mr Trudeau, whose Liberals won office in October after nearly a decade of Conservative rule, has promised increased funding for programs and a review of laws on indigenous peoples.
"We have made this inquiry a priority for our government because those touched by this national tragedy have waited long enough. The victims deserve justice, their families an opportunity to heal and to be heard. We must work together to put an end to this ongoing tragedy."
Canada's Indigenous and Northern Affairs Minister, Carolyn Bennett, says the government will consult the First Nations to find a way forward.
"We will now go and listen to people about what they think this needs to be. And so only then will we have the budget for what we hear and what the families and the experts tell us as to what the most effective actual commission needs to look like."
Assembly of First Nations National Chief Perry Bellegarde has welcomed the steps.
He has been calling on the Canadian government to close the quality of life gap between indigenous and non-indigenous Canadians.
"There must be a sense of urgency. The First Peoples of Canada have suffered too much, and for too long. Our people have waited in terrible conditions, suffering indignity and going without many of the basic services other Canadians take for granted."
The Royal Canadian Mounted Police say more than 1,000 Aboriginal women had been murdered between 1980 and 2012.
They say another 108 are missing under suspicious circumstances, and some cases date back to 1952.
Advocates, Aboriginal leaders and victims' families have been calling for a national inquiry for more than five years.
Hilda Anderson-Pyrz, whose sister was killed in 2011, says the announcement is a step in the right direction.
"I think that it's very empowering and it's very hopeful to Indigenous people across Canada that this government is actually hearing what our people have been saying, like our people have been saying for years."
