It will be the first time a European Tour event has been held at Close House, the club where the 43-year-old Englishman has been tour professional since 2011.
"I'm sure it will be a fantastic test of golf for the players coming up to the north-east," Westwood said in a news release on Tuesday.
"We've not had a tournament up there for a few years now, even north of Birmingham, so it will be great to take the British Masters to Newcastle."
Westwood, who had two spells at the top of the rankings in 2010 and 2011, finished third on Sunday behind Swedish champion Alex Noren when Donald hosted the tournament at The Grove just outside London.
Fellow Englishman Ian Poulter was the host at Woburn when the British Masters returned to the schedule in 2015 following a seven-year absence.
Compatriot Justin Rose, Olympic gold medallist in Rio de Janeiro in August, is due to take over as host for the 2018 edition.
(Editing by Pritha Sarkar)
