Layton, 59, said he has a treatable form of the cancer and will minimize his political activity for several months during treatment, the Canwest News Service reported.
He noted his wife, also a member of Parliament, had survived cancer treatment and his father also overcame prostate cancer.
"I'm a fighter and I'm going to beat this," Layton said.
Immediately after the announcement Liberal opposition leader Michael Ignatieff issued a statement wishing him well.
"I wish him strength and courage on the road to recovery, and I know all Canadians stand behind him in this fight," Ignatieff said.
Layton was elected to lead the party in January 2003 when the NDP had just 13 seats in Parliament. It now has 37 seats, the Globe and Mail reported.