The resolution to this effect was passed by the state cabinet which met under chief minister N Chandrababu Naidu in Hyderabad.
Amaravathi is located in Guntur district and the same name is adopted for the capital in view of its historical, spiritual and mythological significance, Naidu told reporters tonight.
It is the city of Lord Indra, the king of the gods, the chief minister said referring to mythology.
Amaravathi, located on the banks of river Krishna, derives its name from Lord Amareswara temple in the village and it isknown as 'Dakshina Kashi' (Kashi of the south), he said, adding it was the capital of Satvahana rulers for 400 years.
Amaravathi has a lot of Buddhist significance as well with Lord Buddha believed to have visited the village, besides King Ashoka and famed Chinese traveller Hsuan Tsang also believed to have visited the place.
It has been found in excavations that certain relic of Gautam Buddha was preserved in the village.
Buddhist spiritual guru Dalai Lama had conducted 'Kalachakra', a Buddhist event, some years ago at Amaravathi and the Centre has recently identified it as a heritage city, Naidu said.
The government would like to develop the capital as a modern city that is convenient to poor people as well, the chief minister said, adding it would be a "people's capital".