Cotto will try for his fourth weight division title on the eve of the annual Puerto Rican Day Parade in New York. He faces a fighter who has lost only once in 14 years, though Martinez has looked vulnerable in recent fights and will be 39 when he enters the ring.
Martinez has been knocked down in his last three fights, and struggled in his last bout with Martin Murray before 40,000 fans in his native country. In the fight before that, he was easily beating Julio Cesar Chavez Jr. when he was knocked down in the 12th round and had to hold on to survive.
"It has been my dream to fight in the big room at Madison Square Garden, a place where many great fighters have showcased their talents," Martinez said.
The 33-year-old Cotto (38-4, 31 KOs) is coming off a strong performance in an October comeback fight, when he stopped Delvin Rodriguez in the third round of a 154-pound fight. Before that, though, he lost 12-round decisions to Floyd Mayweather Jr. and Austin Trout in 2012.
"I am very happy to be back again to my second home, Madison Square Garden in New York, to once again make history in front of my fans," said Cotto, who will fight for the ninth time at the Garden. "I will be ready and prepared to do whatever it takes to bring the WBC middleweight title of the world to my country of Puerto Rico."
Cotto, who began his career as a 140-pounder in 2001, will be fighting for the first time at 160 pounds.
Martinez (51-2-2, 28 knockouts) will be defending the title he has held since beating Kelly Pavlik in 2010. He has made six successful defences.
The fight will be televised on pay-per-view by HBO.