Ali Babacan, the Turkish foreign minister, signed a contract in Berlin on Friday to establish a German-language university in the Turkish city of Istanbul.
The university, part of the Turkish state system, is planned to have faculties of law, science, economics, arts, social sciences and engineering, but will confer German degrees and cultivate close links with German and Turkish business corporations, reported dpa.
Germany has lagged behind the United States and Britain in setting up universities abroad to meet demand for tertiary education in growing economies.
One problem has been that interest in Asia and the Middle East in being taught in the German language is low.
German is more widely spoken in Turkey, because many Turks have worked in Germany as migrants, and the university will have a language school to train new students to speak and write German.
It will also cater to ethnic Turks who have come up through the school system in Germany but prefer to study in Istanbul.
German Foreign Minister Frank-Walter Steinmeier and Education Minister Annette Schavan signed the agreement for Germany.
Steinmeier said, "Not only will the university bring our students and academics closer, but it is also a symbol of the close political and social links between both our countries."
Turkey is to provide the buildings and running costs, while Germany is to recruit professors and top up their salaries.
The next phase will be to gather a consortium of German universities willing to second staff and expertise to the project.
Germany is also setting up a university next year in Vietnam, where thousands of people speak German after stays in Germany.