The Tumucumaque National Park, in the northern Amazonian state of Amapa, will cover 9,562,770 acres (3,870,000 hectares) - an area the size of Switzerland or Taiwan.
The reserve is thought to contain many unidentified plants and unique animal species.
Click here for a map of the area
But observers say that with a corruption scandal involving Brazil's development agency for the Amazon fresh in people's minds, there is a degree of scepticism towards the project.
The park is set in a virtually uninhabited region, where there are no roads.
Hidden wealth
It is an area of waterfalls and impassable rivers, with granite outcrops rising up above the forest.
The region is home to a large number of primates and other animals such as sloths, jaguars, freshwater turtles and the harpy eagle.
Scientists suspect it also contains many species still to be identified.
"Since Tumucumaque is one of the greatest unexplored places on Earth, we can only imagine what undiscovered mysteries will one day be found in the park," said Russell Mittermeier, President of the organisation Conservation International.
"With the creation of Tumucumaque Mountains National Park, we are ensuring the protection of one of the most pristine forests remaining in the world," Brazilian President Fernando Henrique Cardoso said.
"Plants and animals that may be endangered elsewhere will continue to thrive in our forests forever."
Scandals
But for this to be true, the BBC's Tom Gibb in Sao Paulo says the park will need considerably more resources than those invested in Brazil's other national parks.
Although protected by law, these are in practice plagued by illegal loggers, miners and animal collectors.
The government environment agency, which has the job of protecting the parks, is desperately underfunded.
Its staff receive tiny wages and often do not even have basic transport.
The agency is in the process of being reorganised, after repeated allegations of corruption against some of its officials.
International funding
The new park is being created with the participation of the World Wildlife Fund and other environmental protection groups.
It is hoped it will receive money from institutions like the World Bank.
President Cardoso - who is due to attend the Johannesburg Earth Summit next week - has pledged to protect 10% of the Amazon rainforest. So far just 1% is under protection.
The new park is some 568,000 acres (230,000 hectares) larger than Slonga National Park in the Democratic Republic of Congo - until now the world's largest protected tropical reserve.
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Internet links:
Brazilian government (in Portuguese)
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Friends of the Earth Amazonia
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WWF Brazil
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Greenpeace
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