Clerk of the Course at the North West 200 Mervyn Whyte said they had taken the decision to proceed after speaking to Louise.
"Robert was a wonderful ambassador for the North West 200 and for Northern Ireland and we believe he would have wished the event to go ahead," he said.
"Robert will be remembered with great fondness by all who knew him. His presence, sense of humour, enthusiasm and love for life will be sorely missed. "
He said that the accident appeared to have been caused by machine failure.
Another Northern Ireland rider, Darren Burns, suffered a suspected broken leg and concussion in the same accident. He is said to be stable in hospital.
Dunlop made his debut on the Northern Ireland roads as a teenager in 1979 and went on to claim his first major win in the Isle of Man in 1983 when he won the Newcomers 350cc race at the Manx Grand Prix.
The Motorcycling Union of Ireland and PSNI are investigating the incident.
Dunlop is also survived by his wife Louise and other son Daniel.
• A number of North West 200 events including live music, fireworks and an air display have been cancelled as a mark of respect, Coleraine Borough Council has announced.
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