The first edition of the new event, to be played from August 21-24 next year at the Albatross course, will have one of the smaller prize funds on the Tour, with one million euros (£850,000) the total purse.
However, European Tour officials - in a week when they have rejected talk of a possible buy-out by the United States-based PGA Tour - have expressed pride at taking golf to a different city.
The deal to put on the tournament, to be known as the D+D Real Czech Masters, was has been described by European Tour chief operating officer Keith Waters as "a real commitment and statement of intent by the sponsors and promoters".
He added: "Albatross Golf Resort is an excellent venue worthy of hosting a European Tour event. The tour always strives to stage tournaments in different cities and I'm sure the people of Prague will enjoy watching some of Europe's best golfers in action, just as our members will enjoy their visit to Albatross Golf Resort."
The Czech Republic last staged a European Tour event in 2011, when Celadna hosted the Czech Open, an event won by England's Oliver Fisher. Prague's Karlstein club hosted the Czech Open in 1997.