The December race in Riyadh's Ad Diriyah district, on the outskirts of the capital, will be the first involving the season five next generation cars and marks Formula E's debut in the Middle East.
The city-based series said it had reached a 10-year agreement with the kingdom's General Sports Authority and national motor federation.
"Saudi Arabia is looking to the future and Formula E is the motorsport of the future," Prince Abdulaziz bin Turki Al Faisal al Saud, vice-chair of the GSA, said in a statement on the Formula E website.
"It aligns perfectly with the country’s 2030 vision and offers the prospect of world-class racing on the streets of the capital for the first time in our history," he added.
"This is the latest in a series of game-changing sports events that the people of Saudi Arabia will now be able to enjoy as families, with benefits that go far beyond the sport to deliver a positive impact across our society."
Saudi Arabia announced last year that, from June, women would be allowed to drive cars -- ending the world's only ban on female driving.
In January, women fans were allowed to attend a men's soccer match for the first time.
"Many other sports are already increasing their presence in Saudi Arabia and we’re proud that they’ve chosen Formula E over other categories in racing," said Formula E founder and chief executive Alejandro Agag.
"Most countries are now looking to Formula E, especially Saudi Arabia which is concentrating on the development of new technologies, renewable energies and electric vehicles."
Saudi Arabia is targeting 9.5 gigawatts of annual renewable energy by 2023 in line with Vision 2030, an economic reform plan launched in 2016 to diversify the economy beyond oil.
The renewable programme involves investment of between $30 billion and $50 billion by 2023.
(Reporting by Alan Baldwin, editing by Toby Davis)
