The 26-million-dollar stadium will be built in the small town of Providence, 11 kilometres (seven miles) south of Guyana's capital city Georgetown and is scheduled to be completed by 2006, according to a Guyanese government release received.
The Indian government will release a grant of six million dollars and low-interest loans of 20 million dollars towards the construction of the stadium, it said.
The funding of the new facility was negotiated with the Indian government by Guyanese President Bharrat Jagdeo during an official visit to India earlier this month.
"I came back with the assurance from the Prime Minister and President of India that the cricket stadium will be built," Jagdeo, who has Indian origins, was quoted as saying.
Guyana is among the Caribbean nations bidding to host matches at the first ever cricket World Cup in the region. The sport's world ruling body has urged these nations to upgrade existing facilities.
Work on the new stadium is expected to begin later this year. Indian engineers recently visited Guyana to conduct soil tests and other studies.
Cricket is one of the most popular sports among Guyana's 700,000 residents, half of whom are of East Indian descent.
The International Cricket Council (ICC) awarded the 2007 World Cup to the Caribbean despite criticism the region did not have the required infrastructure to host the sport's showpiece event.
India, with millions of cricket-crazy television audiences, is widely regarded as cricket's financial superpower.