It is not prostate cancer, but was discovered during his recent treatment for an enlarged prostate.
The type of cancer has not been revealed, but the palace said the King began "regular treatments" on Monday.
Buckingham Palace says the King "remains wholly positive about his treatment". He will postpone his public engagements, with senior royals expected to stand in for him.
The King "looks forward to returning to full public duty as soon as possible", the palace said.
No further details are being shared on the stage of cancer or a prognosis.
The King informed both his sons personally about his diagnosis and Prince William was said to be in regular contact with his father.
Prince Harry, who lives in the United States, spoke to his father and will be travelling to the UK to see him in the coming days.
Statement in full: King diagnosed with cancer. William to return to work after Kate's surgery. The King, 75, returned to London from Sandringham in Norfolk on Monday morning and the palace says he has commenced treatment as an outpatient.
Although he will pause his public events, the King will continue with his constitutional role as head of state, including paperwork and private meetings.
There is a constitutional mechanism for when the head of state is unable to carry out official duties - in that circumstance "counsellors of state" can be appointed to stand in for the monarch.
At present that includes Queen Camilla, Prince William, Princess Anne and Prince Edward, with Prince Harry and Prince Andrew no longer to be called on as non-working royals.
Prince William had also temporarily withdrawn from public engagements while he helped his wife Catherine, the Princess of Wales, as she recovered from "abdominal surgery".
But it was announced earlier on Monday he would return to public duties later this week.
