The current Club World Cup format features seven teams, the winner from each confederation's major continental tournament.
Qatar will be hosting the last two editions of the current format, with the 2019 competition getting under way on December 11.
The new look competition will be played between June and July 2021 and replaces the current format which is played in December every year.
"The new FIFA World Cup for clubs will be a competition which every person, every child, anyone who love football is looking forward to," said FIFA president Gianni Infantino, after the meeting of FIFA Council in Shanghai on Thursday.
"The new [tournament] will be a competition which anyone who loves football is looking forward to. It is the first real and true Club World Cup where the best clubs will compete.”
"It will allow us to generate significant revenues but I want to underline this, very, very clearly ... FIFA will have zero out of this because we will reinvest this in football."
The European Club Association (ECA), which represents 232 teams, wrote a letter to FIFA President Infantino in March saying “the ECA is firmly against any approval of a revised Club World Cup at this point in time” and confirm that no ECA clubs would take part in such a competition.
