The new site will be known as VEVO and is the latest attempt by YouTube-owner Google to find a way of making money from the popular video-sharing website that it bought in 2006 in a £970m deal.
Rival service Hulu.com, set up by News Corp and NBC, is already bringing in advertising revenue from its streaming of television content, and VEVO will be looking to replicate this success with music.
Billed as a "premium online music video hub", the service will be advertising-funded and combine Universal Music's catalogue of music with YouTube's video technology and user-based community.
The content will be shown on a VEVO-branded player, with the partners hoping that the predicted audience of young consumers will appeal to advertisers wishing to target the supposedly hard-to-reach demographic.
Doug Morris, chairman and chief executive officer of Universal Music Group, said: "We believe that at launch, VEVO will already have more traffic than any other music video site in the United States and in the world.
"This traffic represents the most sought after demographic for advertisers, especially as advertising dollars continue their shift from old media to new.
"VEVO will be uniquely positioned to monetise this opportunity and a host of others as we grow it to become 'the' destination for premium music video content online."
The Universal Music Group channel on YouTube is the most watched of any record company, with more than 3.5bn views to date.