The Board of Control for Cricket in India has announced plans for a new Twenty20 tournament in October 2008.
Board president Sharad Pawar announces the new competition
The Champions Twenty20 League will feature two teams from India, competing against two each from England, Australia and South Africa.
And there will be a £2.5m prize fund, with £1m going to the winners.
The new competition is part of the board's answer to the breakaway Indian Cricket League, which is due to take place in October and November.
English county side Leicestershire hosted a similar, but smaller scale competition two years ago, which was won by Pakistan's Faisalabad Wolves.
The prize money on offer in India, however, is on a par with that provided by billionaire Allen Stanford for his own Stanford Twenty20 competition in the Caribbean.
The two home representatives will come from a new Indian Premier League, which will feature franchised teams.
"The new leagues will give tremendous stability to players who have devoted their entire lives to the game," said BCCI president Sharad Pawar.
Past and present India captains Rahul Dravid, Sourav Ganguly and Sachin Tendulkar were present at the launch in Delhi, along with former Australia fast bowler Glenn McGrath and ex-New Zealand skipper Stephen Fleming.
Spin bowler Shane Warne is also supporting the new venture, having turned down a big-money contract offered by the ICL.
The Champions Twenty20 plan, which will see the eight sides divided into two divisions and feature 12 group games, semi-finals and a final in the space of nine days, has been welcomed by the England and Wales Cricket Board and their counterparts in Australia.
Sachin Tendulkar and Glenn McGrath attended the league launch
"For county, state and province players, the introduction of the T20 champions competition provides a new and exciting pinnacle," said ECB chief executive David Collier.
"It will provide teams with the opportunity to earn the title of the world club champions in a format which will be eagerly anticipated by spectators and players alike."
Cricket Australia chief James Sutherland said the competition supported their view that Twenty20 cricket's development "should be managed in a way which engages and harnesses public excitement for the format, while complementing Test and one-day international cricket".
He added: "The champions Twenty20 format will enhance rather than compromise existing domestic and international competitions round the world."
India hopes that the competition will be expanded in the future to include teams from the other Test-playing countries.