The video sharing website will recognise the songs, artists and videos that were most viewed on its channels in the last year, the company announced.
"From catalysing careers and pop culture phenomena to propelling a song's rise to number one on Billboard's Hot 100, our global community's influence is felt across the music industry.
"We're thrilled to celebrate our fans and the music they love with a whole new kind of awards show - the first-ever YouTube Music Awards - judged by you," Danielle Tiedt, YouTube's vice president of marketing, said in a statement.
Actor Jason Schwartzman is slated to present the occasion as they celebrate over one billion worldwide users.
YouTube is recording performances in Seoul, Brazil, Moscow and London for the bash. Eminem and Arcade Fire, plus Lindsay Stirling and CZDA are also set to hit the stage.
Nominations will be announced October 17 and based on the data collected from users. People can then vote online by liking or sharing videos.