Sturgeon said it was clear that the UK was heading for a "hard Brexit" to the detriment of Scotland, and that Scottish voters deserved a choice of remaining in the European Union as part of an independent nation.
Scotland voted 62% to 38% to remain in the EU and Sturgeon said it was for the people to decide whether they followed the rest of the UK or forged their own path.
"I am ensuring that Scotland's future ... will be decided by the people of Scotland," she said at a press conference in Edinburgh on Monday.
"It will be Scotland's choice and I trust the people of Scotland to make that choice."
Sturgeon said the referendum would take place between late 2018 and early 2019.
Her announcement came as the British government prepared to fire the starting gun of leaving the European Union.
Both houses of the UK parliament will vote on the EU Withdrawal Bill later. If it is passed, the bill would allow Prime Minister Theresa May to invoke Article 50 of the Lisbon Treaty, which governs the relationships between EU member states.
That would give the UK a two-year window in which to hammer out a divorce deal with the other 27 EU governments. The negotiations are expected to be tough, and there is no guarantee that a deal could be reached in the time available.
Government ministers have urged the House of Lords not to stand in the way of the bill if, as expected, MPs vote to remove amendments on Monday afternoon.
Any delay in the parliamentary process could mean the process would be pushed later in the month, as the UK government wants to avoid a clash with the Dutch elections, which are held on Wednesday.
The move led to Scottish First Minister Nicola Sturgeon announcing that she would seek approval next week for new Scottish independence referendum.
Series of votes
MPs in the House of Commons vote on the EU Withdrawal Bill first. They are expected to reject two amendments added by the Lords in the past few weeks.
One amendment relates to the rights of European citizens remaining in the UK after Brexit and the second gives Parliament a "meaningful" vote on the terms of the exit deal.
Then the bill goes back to the Lords for final approval. If the Lords insist on restoring the amendments, the government could consider invoking British parliamentary protocol that assigns supremacy to the House of Commons. But that would delay the timetable for invoking Article 50: May has said she wants to get it done by the end of March.
The Brexit Secretary David Davis urged MPs drop the amendments. "Please don't tie the Prime Minister's hands in the process of doing that for things which we expect to attain anyway," he told the BBC Sunday.
"What we can't have is either house of parliament reversing the decision of the British people."
If the Lords agrees to pass the unamended bill, it must get Royal Assent from the Queen -- a formality -- before it becomes law.
It's at that point that May can pull the trigger and formal talks on Britain's exit can begin.
'Dereliction of duty'
May has come under increasing pressure from Parliament in recent weeks as the start of negotiations move closer.
On Sunday, lawmakers published a report which warned that the government's failure to prepare for a scenario in which no deal is reached with the European Union over Brexit would be a "serious dereliction of duty."
The House of Commons Foreign Affairs Committee said that the UK should be prepared for the "real prospect" that the two-year negotiation cycle may end in deadlock.
"The possibility of 'no deal' is real enough to require the government to plan how to deal with it," head of the committee Crispin Blunt said in the report.
"But there is no evidence to indicate that this (scenario) is receiving the consideration it deserves or that serious contingency planning is under way. The government has repeatedly said that it will walk away from a 'bad' final deal. That makes preparing for 'no deal' all the more essential," he added.
"Last year, the committee described the government's failure to plan for a leave vote as an act of gross negligence. This government must not make a comparable mistake."
The report also warns that Britain faces huge pitfalls in attempting to secure an agreement with the 27 member states of the EU and could eventually be left to trade according to World Trade Organization rules, which could enhance risk of economic harm.
"It is clear from our evidence that a complete breakdown in negotiations represents a very destructive outcome, leading to mutually assured damage to the EU and the UK," Blunt added.
"Both sides would suffer economic losses and harm to their international reputations. Individuals and businesses in both the UK and EU could be subject to considerable uncertainty and legal confusion. It is a key national and European Union interest that such a situation is avoided."
'Not as apocalyptic'?
While the report was particularly damning in its assessment of what might come to fruition, those involved in the "Vote Leave" campaign remained calm.
Foreign Secretary Boris Johnson, one of the chief protagonists of the leave campaign, said that the the consequences of failing to reach a deal would not be "as apocalyptic as some people like to pretend."
He told ITV that he remained positive and said EU member states were keen to avoid falling out with the UK.
But International Trade Secretary Liam Fox was less bullish, claiming any failure to secure a deal would be "bad" for Britain.
"It's not just bad for the UK, it's bad for Europe as a whole," he told Sky News.
On potential trade barriers, he added: "That's not in anybody's interest, which is why I understand we need to plan for no deal, but I think it's unlikely to happen because economic reality will get in the way."
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