Chief Minister Naveen Patnaik announced it after holding a meeting with senior party leaders at his official residence here.
"Pratyusha Rajeswari, wife of late MP Hemendra Chandra Singh, has been chosen as the BJD candidate for the Kandhamal by-election," Patnaik told reporters.
The by-poll in Kandhamal was necessitated following Hemendra Chandra Singh's death.
The polling will take place Oct 15 and the counting of votes will take place Oct 19. The Kandhamal Lok Sabha constituency comprising seven assembly segments is spread over four districts - Kandhamal, Boudh, Nayagarh and Ganjam.
While the opposition Bharatiya Janata Party (BJP) has already named former MP Rudra Madhav Ray as its candidate for the poll, the Congress is yet to announce its candidate.
Ray, 77, was a member of the state legislative assembly for three terms between 1990 and 2009 before being elected to the Lok Sabha on a BJD ticket in 2009.
The BJD, however, denied him a ticket in the 2014 Lok Sabha polls and later suspended him for anti-party activities.