Bernie Ecclestone, President and chief executive of Formula One Management and Azad Rahimov, Azerbaijan’s Minister of Youth and Sports signed the agreement.
"We have signed the deal with Bernie Ecclestone and will announce it officially with an event in Baku shortly," Rahimov declared in the feature posted on “Inside the games” business magazine.
The race is set to take place in 2016 and should be called Grand Prix of Europe.
The city of Baku has a street circuit that is already the scene of some motorsport action.
For the last two years it has staged The City Challenge Baku, an event for GT3-cars, which takes place on a 4.4-kilometre circuit around Crystal Hall, the venue built to host the 2012 Eurovision Song Contest, and the National Flag Square.