To be called World Island Resort, the 105,000-square-metre site will have 53 villas and a hotel with spa, conference facilities and library.
Construction is expected to start by the end of 2008 and will take two years to complete.
It is the tenth project launched by Limitless, the international development arm of Dubai World.
Other projects include Downtown Jebel Ali and the $11bn Arabian Canal, both in the UAE, the $300m Sanaya Amman towers project in Jordan and the $12bn Al-Wasl residential project in Riyadh, Saudi Arabia.
The World project is being developed by the local Nakheel.