A spokesman for Dubai Media City said the Studio City would offer a complete technical and community infrastructure for the film, television and music production sectors to flourish.
The city will be built within the complex known as Dubailand, a project which has been described as the Middle East's version of Disneyland.
The infrastructure for the first phase of the project will be completed by the first quarter of 2006.
The city will "provide the same benefits that companies in the other entities of the Dubai Technology and Media Free Zone enjoy", including 100% tax exemption for 50 years and 100% business ownership, the statement said.
"Today there are more than 120 channels operated by 40 broadcast companies based in Dubai Media City. Currently only about 20% of the production work of these companies is done in Dubai," DMC chief executive officer Abd al-Hamid Juma said.
"As much as 80% of these companies are looking to do their production in Dubai itself. Dubai Studio City is creating infrastructure and capacity to cater to this demand," he added.
Dubai, one of seven members of the United Arab Emirates, hosted an international film festival in December during which 77 films from more than 25 countries were screened.