The British actor and rapper, who has Sierra Leonean and Ghanaian roots, has previously spoken about his desire to develop the film industry in Africa.
"Idris Elba will be building a modern studio similar to Hollywood, Nollywood or Bollywood," Zanzibar's minister for investment Shariff Ali Shariff said on Thursday.
He said the government of Zanzibar has granted Elba 80 hectares (almost 200 acres) of land in Fumba, on the island of Unguja, for the studio.
"I'm not sure how we will call it in Zanzibar, whether Zallywood or Zawood, I don't know," Shariff said jokingly as he addressed industry players at the Zanzibar International Film Festival.
Local media said the studio could boost Tanzania's budding efforts to become a hub for international film production.
The studio plan follows discussions last year between Elba and Tanzanian President Samia Suluhu Hassan at the World Economic Forum in Davos, Switzerland.
