Dubai plans to spend 2 billion dirhams ($545 million) on building a canal through its downtown area, part of a series of construction projects being launched as the emirate recovers from its 2009-2010 debt crisis.
The three-kilometer (1.9-mile) canal is to extend from a business district to Dubai's Gulf coast, creating new waterfront land that can be used to build hotels, marinas and other tourist facilities, the government said in a statement.
It did not say how it would finance the project, which is to be completed by 2017.
Billions of dollars of real estate projects have been unveiled by the government and state-linked firms over the past year, triggering a bull run in the stock market but causing concern at the International Monetary Fund.
The IMF warned in July that overspending could leave Dubai vulnerable to another debt crisis if global market conditions deteriorated. Dubai officials say they have brought the emirate's debt under control and are investing to take advantage of strong economic growth expected in the region over coming years.