The bout will take place under normal boxing rules, despite Conor McGregor never having boxed as an amateur or professional. The fight will be at light middleweight (154lbs) and held in Las Vegas on 26 August.
The 40-year-old Floyd Mayweather hasn't fought since his retirement in 2015, while McGregor's last fight was back in November last year.
McGregor took to Twitter late last night to say, "The fight is on." While Mayweather wrote, "It's official" on his Twitter account.
It's being speculated that both men will be paid a staggering $100 million each for the fight to be aired on pay-per-view TV. While some media outlets are reporting that Mayweather is on for a $100 million payday, while McGregor is going to get $80 million. "Let's just put it this way - all sides involved are pretty happy with their deals! It's definitely the biggest fight ever in combat sports history, and probably going to be the biggest payday ever," UFC president Dana White said.
"We've been in negotiations now for a while and to be honest the negotiation went smooth. We got the thing done. The impossible deal is now done."
He added: "Conor McGregor is a guy who's done a lot of good things over here for the sport and this company and he wanted this and the fans wanted it too. I talked to Conor McGregor this morning. He is absolutely 100 per cent positive that he wins this fight and I stopped doubting Conor McGregor a long time ago.
"Floyd Mayweather is 40 years old, he's always had problems with southpaws. Conor McGregor is 27 and he is a southpaw. Whenever Conor hits people, they fall.
"I'm not saying Conor McGregor's going to win. I'm not saying Floyd Mayweather's going to win. But the reason Conor McGregor's as big as he is is he'll fight anybody, anywhere, anytime. He will go after Floyd Mayweather and he will try to knock him out."
Stephen Espinoza, the head of Showtime Sports, who will air the money spinning fight, said, "This is really an unprecedented event. Really we haven't seen anything in modern history that resembles it, it's impossible to predict how many sales this will do."