When Rod Stewart asked his girlfriend Penny Lancaster to drop everything so he could whisk her and her parents, Graham and Sally, off to France for an impromptu vacation on March 9, the model thought nothing of it. Even as Stewart and her father kept nudging and winking at each other during the flight, she still had no clue what the rocker had planned. Just before the foursome lunched at Jules Verne restaurant in the Eiffel Tower, Stewart, 60, got down on one knee, presented Lancaster with a princess-cut diamond ring and asked her to marry him. "I was so shocked I couldn't speak for an hour afterwards," Lancaster, 34, told PEOPLE. "Rod is the most romantic man I know. He chose the most romantic place. It was all so perfect."

After five and a half years of dating—the couple started their romance after Stewart's separation from his second wife, Rachel Hunter—Lancaster says she had "accepted that we wouldn't get married. But in the back of my mind and at the bottom of my heart it was my dream for the man I love to ask me." Unbeknownst to the ever-patient Lancaster, Stewart—who has two kids with first wife Alana Hamilton, two with Hunter and one with ex-girlfriend Kelly Emberg—had decided to make that dream come true long ago. "The last six months have been the best time in my life," the singer says. "My album debuting at No. 1, my birthday spent with my family and finally my first Grammy. But all along, I was planning what was going to top everything—asking my girlfriend to marry me."

With Stewart's divorce from Hunter soon to be finalized, the couple plan to wed later this year. But the celebrations have already begun. The pair hosted a party and a boat cruise for friends and family on March 12 in London. "Both of them looked fabulous," says a guest. "They were kissing and cuddling...Penny looked absolutely stunning, and you could tell she was overjoyed." As was her future husband. "Knowing how much I am in love with her," says Stewart, "I could not be in a happier place than I am right now."