The 24-year-old singer got engaged to Davidson, an actor and comedian, after just a few weeks of dating, according to People.
"They're just two people who found love quickly and make each other happy all the time," a source said. "They both started talking about it this past weekend. It's nothing they've been hiding."
E! News said Grande and Davidson told people they are engaged at Robert Pattinson's house party over the weekend. The couple plan to have a long engagement and are "not rushing" their wedding, according to Us Weekly.
"They are a perfect fit," an insider said. "Their friends are really excited and supportive."
"They are both constantly making each other laugh," the source added. "Their moms have met. They've been very public with their relationship on social media, and they are in love."
Grande and Davidson were first linked in May following the singer's split from Mac Miller, and have yet to address the engagement rumors. Grande teased the new song "Bed" featuring Nicki Minaj in Instagram posts Monday.
"Bed out Thursday #Queen @nickiminaj i love you forever & ever," she wrote.