The former `Frasier` star is believed to have proposed to girlfriend Kayte Walsh in October - the same month in which she tragically suffered a miscarriage - and the couple are looking forward to tying the knot.
His representative Stan Rosenfield told RadarOnline.com: "They are engaged. They never really announced it, they are very happy and very much in love."
Kelsey, 55, started dating 29-year-old Kayte earlier this year, following his split from wife Camille Donatacci.
The actor has previously spoken about his relationship with former flight attendant Kayte, describing how "happy and in love" with her he is.
He said: "We are really happy and in love. We`re looking for a new apartment together in New York but we haven`t found one yet. We`re waiting for the perfect place."
While Kelsey has got engaged, his wife of 13 years Camille filed for divorce in July citing "irreconcilable differences" as the reason for the separation.
The former Playboy model - who has two children, Mason Olivia, eight, and Jude Gordan, five, with her estranged spouse - is reportedly requesting joint legal custody and primary physical custody of the children, as well as spousal and child support.
Kelsey - who is believed to be worth $85 million - is allegedly not offering spousal support and is requesting Camille receives none of his earnings from before the marriage.