Critics accuse her of rushing to an election to capitalize on a surge in her Labour Party's popularity in opinion polls that analysts say typically occurs in the first weeks after a party chooses a new leader.
Gillard said she was honoring a pledge she made after she grabbed power in a surprise Labor coup to quickly allow voters to choose the prime minister and government that they want.
"Today, I seek a mandate from the Australian people to move Australia forward," she told reporters at Parliament House.
"I'll be asking Australians for their trust so that we can move forward together ... with plans to build a sustainable Australia," she added.
Opinion polls point to Labor winning a second three-year term, but analysts expect a tight contest against a resurgent conservative opposition led by Tony Abbott.
Gillard was former Prime Minister Kevin Rudd's deputy.
Rudd became a Labour Party hero when he led it to a crushing election victory in November 2007 after 11 years in opposition.
He remained one of the most popular prime ministers in modern Australian history until he made a series of unpopular political moves earlier this year, including shelving a key pledge to make major industries pay for the carbon gas that they emit.
Abbott has led an attack on the government over its 52 billion Australian dollars ($45 billion) economic stimulus spending that helped Australia scrape through the global economic recession with a single quarter of mild economic contraction in late 2008.
Abbott told a conservative party meeting in Queensland, a key state to the outcome of the next election, the government has wasted money and the leadership change from Rudd to Gillard was a "seamless transition from incompetence to incompetence." The government under Rudd this year abandoned a AU$2.4 billion free home ceiling insulation program after four workmen died and scores of house fires were blamed on sloppy installation. A AU$16 billion program to build a new hall in every school has produced scores of examples of inflated construction contracts.
"The people of Queensland won't be conned by a prime minister who is now running to the polls before she has established her credentials to lead our nation," Abbott said.
Gillard has promised to return Australia to a surplus budget in three years.
