An agreement has been signed by the manufacturer of teddy bear, the Great British Teddy Bear Company and China's Tianyou Wentou.
The museum will include a teddy theme hotel and a low-carbon amusement park which uses green building techniques to show children how to live an environmentally friendly life, state-run Xinhua news agency reported.
Among the attractions, visitors will be able to experience William Shakespeare's plays as interpreted by giant teddies.
The construction of the museum is expected to be finished by May 2016, according to Song Lingtao, CEO of Tianyou Wentou.
Currently there's one teddy bear museum in China in Chengdu in southwest China's Sichuan province.
As the world's largest teddy bear museum, the Chengdu museum not only has exhibits but also shows teddy movies and presents Chinese elements like giant pandas and the Great Wall.