In anticipation of the event, the establishment of a governing body - the World Organization for Racing Drones - was also formally announced.
Dubai will host the first 'World Drone Prix' in March, which organisers say will be the world's biggest drone race, with a grand prize of $1 million.
Speaking at the last day of the World Air Games at Skydive Dubai's Palm drop zone, Minister of Cabinet Affairs Mohammed Abdullah Al Gergawi said that the upcoming Drone Prix represents the future of air racing and drone technology.
"In Dubai, we believe that every end is the beginning of a new journey, and our journey towards being in the future starts today," he said.
"The World Drone Prix is the future of racing, pushing the boundary of drone technology until it becomes the reality of transport in the future."
"Since the beginning of time, man has raced by running, horseback, car and plane," Al Gergawi added.
"The World Drone Prix will be the biggest race of its kind, with a grand prize of $1 million."
The Drone Prix will be held under the direction of Shaikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai.
In anticipation of the event, the establishment of a governing body, the World Organisation for Racing Drones, was also formally announced.
"The organisation will govern the standard of the drone racing industry, and establish the code that will be the standard for races in the future," Al Gergawi added.
"Dubai is no longer a city that dreams of the future. It is a city from the future and with the World Drone Prix will inspire the technology of the future."
In addition to organising the March competition and setting rules and regulations, the organisation will also be charged with awarding future host cities the race, accrediting pilots and other organisations, and spreading awareness of potential uses of drone technology.
On December 20, the World Organisation for Racing Drones will release a code of conduct and rules and regulations for the event.
Qualifying events, which will be held at various locations on every continent, will begin on January 1, 2016. To qualify, teams must place in first, second or third positions in qualifying races of 15 or more teams.
Teams that qualify for the competition will be flown into Dubai in early March to take part in a practice run on March 9.
The opening day of the event will be held on the evening of March 10, with the main event - which includes freestyle and track races - taking place on March 11th.
Prizes will be awarded in several other categories, such as best manufacturer.
Event organisers noted that the Drone Prix's $1 million grand prize dwarfs that of other drones races that are currently being held.
The October 17-22, 2016 World Drone Racing Championship in Hawaii, for example, will give $200,000 in cash, prizes and trophies to winners across multiple categories.
To participate in the Drone Prix, teams must have at least five members, including a pilot, a navigator, someone in charge of the pit-stop, a pit-stop technician, and a team leader.
All teams must have at least one sponsor.
All drones that take part in the competition will have similar batteries and air frames to ensure competitive races, and must be operated by team members using remote control, rather than autonomously on pre-programmed routes.
The World Grand Prix will mark the second major drone competition hosted by Dubai in 2016.
In February, the winners of the second UAE Drones For Good Awards, which has attracted 1,107 participants from 165 countries, will be announced at a special ceremony prior to the Fourth Government Summit.
Drone Prix terms
> Qualifying events at various locations will begin on January 1, 2016
> Teams that qualify will be flown to Dubai in early March
> Each team must have at least 5 members, including a pilot, a navigator, someone in charge of the pit-stop, a pit-stop technician and a team leader