The International Olympic Committee and the International Skating Union announced their decision at a news conference in Salt Lake City on Friday.
The Canadian duo originally finished second to Russians Elena Berezhnaya and Anton Sikharulidze last Monday, sparking a storm of protest.
But IOC president Jacques Rogge told the world's media: "The IOC's executive board received an official proposal from the International Skating Union (ISU) to award a gold medal to Sale and Pelletier.
"The gold medal will be awarded to the Canadian pair."
The Russian pair, who won the event after a 5-4 vote that surprised many observers, retain their gold medals.
ISU president Ottavio Cinquanta also announced the suspension of French judge Marie-Reine Le Gougne with immediate effect.
He said an ISU council had undergone an "extraordinary deliberation for an extraordinary situation" and decided she had been guilty of "misconduct" in Monday's voting.
Cinquanta would not go into details about the evidence the French judge had given.
But he said she had signed a declaration after being interviewd by the ISU president and other members of the council.
Cinquanta said "The council got enough evidence that this individual was responsible for misconduct, she acted in a way that could not adequately guarantee both pairs equal conditions."
However, the ISU president said he had no evidence, as yet, of any collusion between French and Russian officials but the investigation would go on.
The decision could lead to a flood of other claimants, and has also brought into light the difficulties surrounding individuals deciding the outcome of some sporting events.
Rogge said: "I want to stress this is a matter for the international federations, but we will talk to all of them to see where we can improve."
Rogge revealed that of the nine members of the IOC who met to vote on the ISU's deliberations, seven were in favour of giving the Canadians a gold, with one member abstaining.
The IOC chief now hoped that "the full attention would go back to the athletes."
Mike Chambers, president of the Canadian Olympic Association, said: "I think the Russians should be happy with their gold medal and take the accolades in their home country.
"It's a win-win result."
Sale and Pelletier will receive their gold medals on 21 February, at the end of the ladies free figure skating.
The awarding of a second gold medal is not unprecedented, though the circumstances were significantly different.
In 1993, the IOC awarded a second gold medal in synchronised swimming from the Barcelona Games to Canada's Sylvie Frechette.
The IOC's executive board agreed that Frechette was placed second because of a judging error and should be awarded a gold.