The Museum of Narrative Art will be located in LA's Exposition Park, near the downtown area, and will house the filmmaker's extensive collection of art and film memorabilia, including some from the "Star Wars" franchise.
Lucas has said he will almost entirely fund the museum, which will sit on a seven-acre (three-hectare) location and whose design looks like a huge space ship.
Los Angeles beat out competition from San Francisco, which had proposed housing the museum on Treasure Island, in the middle of the San Francisco Bay.
Local officials in Los Angeles welcomed the announcement, saying it would bring thousands of jobs to the city and draw tourists keen on seeing the original Darth Vader mask along with Norman Rockwell paintings.
"Art exists to inspire, to move, to educate, and to excite," mayor Eric Garcetti said in a statement. "Thanks to George Lucas and (his wife) Mellody Hobson, millions of Angelenos and visitors will enjoy an extraordinary collection anchored in storytelling -- an art that carries so much meaning in the history and legacy of Los Angeles."
Lucas, 72, for years had been trying to find a location to house his art collection that includes works by Rockwell, Edgar Degas, Winslow Homer and Pierre-Auguste Renoir as well as memorabilia from the "Star Wars" saga and his other films.
The museum's board of directors and city officials had no official date for the opening of the museum.
