Authorities hope the mixed-gender centre will help modernise the kingdom's deeply conservative society.
The high-tech campus will focus on science and technology, with professors and students drawn from around the world.
The multi-billion-dollar university is being seen as an attempt by King Abdullah to promote reforms in the kingdom.
Women will also not be required to wear veils in the co-educational classes.
This is in contrast to the wider country where a strict Wahhabi branch of Islam is practised and women are completely segregated.
Hussein Shobokshi, a columnist for the Asharq Alawsat newspaper, told Al Jazeera: "It is a paradigm shift. Education is the tool for empowering this change. This is a global initiative.
"This is a very ambitious project that puts a lot of pressure on the Saudi institutions to raise the bar and meet the level of this university - culturally and ethics wise."
Al Jazeera's Sabina Castelfranco reports from Jeddah.
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