Formula One boss Bernie Ecclestone has sealed a deal to hold a Grand Prix on a circuit around the streets of the Spanish city of Valencia from 2008.
Ecclestone (left) has sealed his deal to hold a race in Valencia
The race, to be called the European Grand Prix, will be the second Spanish race on the F1 calendar.
Barcelona's Circuit de Catalunya recently extended its contract to host the Spanish Grand Prix until 2016.
Valencia has signed a seven-year contract, and the race is expected to be held late in the season.
Ecclestone told the Reuters news agency on Friday: "The agreement was signed this morning along exactly the same lines as we agreed last month."
At that time, Ecclestone caused a political storm in Spain by saying the deal was conditional on the Partido Popular holding power in local elections.
But Ecclestone later denied that was the case, saying: "I said I wouldn't formalise the contract until after the elections because I didn't know who I would be signing it with."
Popular's Francisco Camps was re-elected president of the Valencian regional government last month.
To have a race on the streets when we have a circuit only 20 or 30km away in Valencia is a little bit difficult to understand
The Valencia circuit will be between 4.1-4.3km (2.5-2.7 miles) long and will be based around the city's America's Cup port.
Its harbourside location is bound to draw comparisons with the Monaco Grand Prix.
Valencia's willingness to pay an estimated 26m euros (£17.5m) to stage each race as well as the boom in popularity of F1 in Spain, sparked by the emergence of double world champion Fernando Alonso, are seen as major factors behind the decision.
At last month's Spanish Grand Prix, Alonso said he had mixed feeligns about a race in Valencia.
"Four years ago, we didn't have even TV coverage and now we will have two Grands Prix, so that's very special," said the two-time world champion.
But the McLaren driver added that he was at a loss to understand though why there will be a street circuit when the Ricardo Tormo track lies on the outskirts of the city.
"The direction Formula One has tried to go in the last couple of years is to improve safety," added Alonso ahead of his home race this weekend in Barcelona.
"We have changed the last couple of corners here in Barcelona to slow down the cars.
"Now, to have a race on the streets when we have a circuit only 20 or 30km away in Valencia, that is a little bit difficult to understand what the Formula One bosses want.
"But for us, so far as it is safe and they put in what is required to make it safe, we will race anywhere."