The couple married at Canongate Kirk, in Edinburgh, in July 2011.
The birth will follow the arrival of the Duke and Duchess of Cambridge's baby, which is due this month.
In a statement, Buckingham Palace said: "Mr and Mrs Mike Tindall are very pleased to announce that Zara Tindall is expecting a baby in the new year."
It said the couple's parents, the Princess Royal and Captain Mark Phillips, and Mr Phillip and Mrs Linda Tindall, and members of both families were "delighted".
"This baby will be the first child for Mike and Zara and the third grandchild for the Princess Royal."
Mike Tindall took to Twitter to express his gratitude to well-wishers. "Thanks for all the kind messages, we are very excited," he wrote.
The former England rugby player, who has broken his nose eight times, also joked: "I agree with you all that hopefully he/she won't have my nose".
Ms Phillips' brother Peter has two daughters, Savanna and Isla.
Prime Minister David Cameron's official spokesman described the announcement as "quite terrific news".
He told reporters: "The prime minister will send his very, very best wishes to the happy couple."
The new baby will become 16th in line to the throne and the fourth great grandchild to the Queen and the Duke of Edinburgh.
The others are Savannah and Isla, and the Duchess of Cambridge's expected baby.
Ms Phillips, 32, does not hold a royal title and is not an HRH. After her marriage, she decided to keep her maiden name.
Her children will be titled Miss or Master Tindall.
Sporting success
The couple, who are determinedly low key, met during England's Rugby World Cup-winning campaign in Australia in 2003.
Mr Tindall, 34, a former England rugby star, is now a player-coach at Gloucester.
Ms Phillips has achieved sporting success in her own right, winning individual gold in three-day eventing at the World Equestrian Games in Germany in 2006.
The title helped her become BBC Sports Personality of the Year later that year, following in the footsteps of her mother, Princess Anne, who won the award in 1971.
As a member of the Great Britain eventing team, she won a silver medal at the London 2012 Olympics.
She is planning to take part in the next Olympic Games, which will be held in Rio in 2016.
Asked if Zara still had the next Olympics on her schedule now she was a prospective mother, a spokeswoman for the couple said: "She can still compete, it totally depends on horses and whether she feels it's appropriate."
Ms Phillips will drop from 14th to 15th in line to the throne following the birth of the Duke and Duchess of Cambridge's first baby.
Their baby is due in mid-July, although the exact due date is not known.
The baby will be delivered in the private Lindo Wing of St Mary's Hospital in Paddington, west London - where Princess Diana had her sons.
Title: Zara Phillips and Mike Tindall expecting first baby
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