Those interested can sign up from Friday for the initiative which lasts over the next 30 days and coincides with Ramadan, a month of fasting.
For each kilogram lost, participants will receive a gram of gold, which is currently worth about $45 (£30).
Those taking part – dubbed “golden losers” – need to lose at least two kilos to receive the payout.
The three participants who lose the most weight will be entered into a draw to win a gold coin worth $5,400.
Called Your Weight in Gold the scheme was announced by Hussain Nasser Lootah, director general of Dubai Municipality.
“Ramadan is the most appropriate season to launch such initiatives as it reminds us about many health benefits of reducing weight and encourages us to take strong steps to change our bad lifestyles,” he said.
There has been alarm across Gulf States at the sharp rise in obesity blamed on increasing fast-food diets and a lack of exercise.
The Your Weight in Gold scheme is being sponsored by the Dubai Gold and Jewellery Group and Dubai Multi Commodities Centre (DMCC) .
Ahmed bin Sulayem, executive chairman of the DMCC said: “We would highly encourage everyone from all walks of life to take part in this great initiative and hope DMCC’s contribution of AED 100,000 ($27,225) worth of gold coins will help motivate individuals.”
At Friday’s registration participants will be able to receive advice on how to lose weight without harming their health.
The final weigh-in will take place on 16 August.