The stadium will have the third biggest capacity of any arena in Australia and host Australian Rules, rugby union and league matches as well as concerts.
"We are going to build one of the world's great stadiums," state premier Colin Barnett said. "I would hope it's a spectacular piece of architecture in its own right."
Barnett said the budget for construction was A$700 million with another A$300,000 earmarked for rail and other transport costs.
The stadium will be built on a site currently occupied by part of a golf course and a rubbish tip in a bend of the Swan River, which runs through the centre of the city.