Mexico's Caribbean beach resort of Cancun will host an annual Formula One race for at least five years starting in 2006.
The race will be held on a new track designed by German expert Hermann Tilke, who also designed the Shanghai's circuit.
Mexico has not been part of the Formula One circuit for more than a decade since the last race in Mexico City in 1992.
The Cancun site was chosen over at least five others, including one in Russia.
"This track offers some very, very high speeds with sharp curves that make cars brake at speed," said Tilke's representative Dirk Schneider.
He said the track would accommodate average speeds of 220 kmh (125 mph) and top speeds of about 300 kmh (186 mph).
The announcement comes as Formula One supremo Bernie Ecclestone appears to be looking for a new grand prix venue after falling out with the owners of Britain's Silverstone track.
Ecclestone said last week that the Silverstone race, listed provisionally on the 2005 F1 calendar, would be axed after a breakdown in negotiations with the circuit's owners, the British Racing Drivers' Club.
Ecclestone has said repeatedly that the sport's future lies increasingly in the developing world.
Cancun and Formula One have agreed for the time being to run the race from 2006 to 2010, with an option to renew for another five years.
