Local tennis fans will be the biggest winner when the revamped World Team Cup offering $20 million in prize money plus ranking points is held in Australia from 2020.
The men's event will be held in partnership with Tennis Australia and is expected to lure the world's top players ahead of the Australian Open, says the ATP.
"We're delighted to have reached this outcome, which will change the landscape of the ATP World Tour," ATP president Chris Kermode said in a statement.
"This event will enable us to kick off our season with a major team event, with minimal impact on existing player schedules at the start of the year.
"The event has huge potential, and we now look forward to working together with Tennis Australia in bringing our vision to fruition."
Tennis Australia CEO Craig Tiley hailed the 24-team event as "an exciting new era in men's tennis".
"The world's top players will continue to start their year in Australia in a format that we believe will deeply engage the fans across Australia and throughout the world," he said.
The competition is likely to be a part of the build-up to the Australian Open, which begins in mid-January.
A smaller World Team Cup was held from 1978 to 2012 in Duesseldorf, Germany. It offered no ranking points and suffered from being on the calendar a week before the French Open.
The new event may cause a headache for the International Tennis Federation (ITF) which runs the Davis Cup and Fed Cup team events in an already crowded calendar.
The ATP said details of the new event would be made public "in due course".