The city, 28 kilometres (17 miles) west of the capital Seoul, hopes to eventually attract up to $290 billion in investments by 2030 to build casinos, hotels, auto racing tracks, a marina and K-pop concert halls in its district of Yongyu-Muui.
Incheon hopes the tourism complex will lure the growing middle and upper class from China, who are spending more on leisure and travel, and tourists from Japan.
To increase its appeal to Chinese tourists, the new island will be named "EIGHTCITY" and built in the shape of "8'' after the auspicious number in China.
The 5.7 million passengers passing through Incheon International Airport every year will also be targeted, a head of the project developer told a briefing.
"It will become the world's top city that has the creativity of Dubai, convention centres and casinos of Las Vegas and Macau, as well as the shopping centres and financial hubs of Hong Kong and Singapore," said Park Seong-Hyun, vice chairman of EIGHTCITY Co., the project's developer.
International hotel operator Kempinski AG and South Korea's flag carrier Korean Air Lines Co. are among the shareholders in the developer.
When completed, Incheon said the area will be three times larger than Macau at 80 square kilometres (30 square miles).
In early 2000s, Yongyu-Muui district was designated as a free-economic zone, along with several of Incheon's other districts, to boost foreign investment in Asia's fourth-largest economy.
But the Yongyu-Muui project saw little progress partly due to the global financial crisis. Incheon officials said they hope to gather fresh momentum for "EIGHTCITY" island to create a growth engine for the country.
The EIGHTCITY chief said it secured $2.8 billion from South Korean investors and $1 billion from Britain's Sanbar Development Corp., which will help get the project off the ground. The initial investment will be used to compensate island residents early next year. Building infrastructure and reclaiming land will cost another $27 billion.