The luxury complex will be the latest of Dubai's huge projects intended to establish the booming Gulf Emirate as regional tourism hub.
One of seven semi-autonomous states in the oil-rich United Arab Emirates, Dubai is hoping to draw 10 million tourists a year over the next decade.
"The (reason) for this is the fact that tourism plays a very large role in Dubai's economy," said Saeed al-Muntafiq, chief executive of Tatweer, the Dubai government-owned developer of the project.
"We need to expand our capacity to accommodate tourists."
proposed Bawadi project outside Dubai city will feature 31 hotels, offering more than 29,000 rooms projected to host 3.3 million guests by 2016.
"We need to expand our capacity to accommodate tourists"
Chief executive of Tatweer
The 6,500-room Asia Asia hotel will be the largest in the world, said al-Muntafiq.
The project will be built on a 10-kilometre strip of land with total investment estimated at 100 billion dirhams ($27.2 billion), he also said at a press conference.
Many of the 31 hotels will be based on themes ranging from the Arabian Desert to the Wild West.
The first phase of the project, which will feature entertainment centres and theatres meant to attract top artists and the Asia Asia hotel, will be completed in 2010.
The final phase will finish four years later.
Tatweer will put up 40% of the project's total cost and the rest will come from investors.
Dubai, which attracted more than six million tourists last year, is in the midst of a construction frenzy, with resorts, malls, sports installations and residential complexes sprouting up across its desert sands.
The latest tourist venture was unveiled in the presence of Sheikh Mohammad bin Rashed al-Maktoum, the ruler of Dubai, who is the driving force behind the emirate's spectacular transformation into a business and leisure hub.
Sheikh Mohammad is also the UAE's vice-president and prime minister.
Bawadi will rise near Dubailand, a complex projected as a Middle East version of Disneyland.
Asian workers complain of poor
Other ambitious projects under way include the Burj Dubai tower, which will be 800 metre-high when it is completed at the end of 2008, becoming the world's tallest skyscraper, and The Palm and The World man-made island projects off Dubai's coast.
Dubai’s sprawling tourist infrastructures are mostly being built by Asian labourers, some of whom have protested against their working conditions.
A large riot at the Burj Dubai site in end-March prompted the New York-based Human Rights Watch to issue a statement calling on the UAE government to "end abusive labour practices" describing them as "less than human".
The move prompted the Ali al-Kaabi, the UAE labour minister, to announce that the government was working on a law that will allow labourers to form unions and legalise collective bargaining.