The Cabinet has also given a green signal to the master plan of the capital city prepared by the Singapore government agencies.
Naidu told reporters after a cabinet meeting that it was unanimously decided to name the new capital Amaravati.
The new capital is being built in Vijayawada-Guntur region and Amaravati, the ancient town on the banks of the Krishna river, is part of the region.
Naidu said the new capital would have the strength of both the 'vastu' and auspicious name.
The capital city is likely to be structured in three rings-the core capital region, capital area and a larger capital region.
Naidu said the master plan for the first phase of the capital would be ready by May 15.
The chief minister announced that the new capital would be linked with radial roads.
He said a 200-km-long ring road will be built connecting the new capital with Vijayawada and Guntur.
(With agency inputs)