YouTube owner Google and the world's largest music company, Universal Music, will launch a new site to stream high quality videos.
The website, which will feature advertising before videos, will be called Vevo and will feature Universal Music's back catalogue.
Last month, YouTube was forced to block music videos for UK users after failing to reach agreements with Warner Music Group on the fees it paid to the label and its artists for the content.
Universal's eLabs executive vice-president Rio Caraeff said the project would be more appealing to advertisers and help all parties generate more revenue from making streaming music freely available.
Speaking to the Reuters news agency, Mr Caraeff said: "The rationale is to help make Vevo a place that brands feel more comfortable.
"Ultimately we think it will increase in effect the CPMs and drive more revenue to YouTube and more revenue to the music business than they can have today."
YouTube, which was initially launched to host content generated by users, has been embroiled in numerous controversies over copyright issues as music companies and television channels objected to clips from popular shows and video being hosted on the website.