"Brussels has clearly attacked Hungary in recent weeks regarding the law", Orban said in a video posted on his Facebook page.
The legislation, which includes a ban on the "depiction or promotion" of homosexuality and gender reassignment to under-18s, has drawn scorn across Europe.
It has been billed by Budapest as a way to protect children, but opponents argue that it conflates paedophilia with homosexuality and stigmatises the LGBTQ community.
Orban said the referendum would comprise five questions, including asking citizens if they agree that schools should be permitted to "talk about sexuality to their children without their consent".
It will also ask participants if they support "the promotion of sex reassignment treatment for minors" or the "unrestricted exposure of children to harmful sexual content".
He urged all participants to answer "No" to the questions.
No date has been set for the referendum, which he presented as a list of demands that the European Union would like to impose on Hungary.
Orban's announcement of the referendum follows claims reported by international media Sunday that Hungary may have used Israeli-made spyware Pegasus to target some 300 smartphones, including those of journalists.
The government has denied the allegations, but they have led to outrage and heightened concerns about press freedom.
"Transparent and predictable: the Pegasus scandal erupted a few days ago, the government stutters, it has no answers, then it came to the solution: let there be a referendum!" opposition lawmaker Bernadett Szel told AFP.
"The truth is... their power is in danger. That is why people are being asked to vote on sex-changing surgeries and sexual propaganda: those whose biggest problems are runaway inflation, lost jobs, heavily taxed wages."
Budapest's liberal mayor Gergely Karacsony, who hopes to run against Orban in next year's general election that's expected to be a tight race, also said the referendum was a diversion tactic to distract from other domestic issues.
Under constitutional changes enacted in 2011, more than half of registered voters need to partake in a referendum for it to have legal implications. No referendum has fulfilled this requirement since.
A 2016 referendum on migration had just a 43 percent turnout and was voided, though the anti-immigration Orban declared it a victory as over 98 percent of those who voted said "No" to the EU's mandatory refugee relocation quota plan.
The LGBTQ law has sparked another row between Brussels and Budapest and protests against the bill inside and outside of Hungary.
The European Commission launched an infringement procedure against the law, which came into force this month, saying it violates EU rules on rights to freedom of expression, as well as free trade and provision of services.
Hungary swiftly hit back, accusing Brussels of interfering in domestic affairs.
EU commission chief Ursula von der Leyen has called the bill a "disgrace" and said that the EU executive would use "all powers available" to force Hungary to repeal or modify the law.
An infringement procedure involves several steps and could drag out over years to ultimately go to the European Court of Justice, which could impose financial penalties.
Hungary has two months to respond to the arguments put forward by the commission before the procedure enters the next stage.
Budapest has also accused Brussels of holding off on its approval of Hungary's Covid recovery plan because of its opposition to the anti-LGBTQ law.
Brussels last week missed a self-imposed deadline to approve Hungary's 7.2 billion euros ($8.5 billion) spending plan for the post-pandemic funds.
