The prime minister said the Islamic City, with its unique design and functions, would propel the university to be among the global league of premier universities in the 21st century.
"I believe the Islamic City will boost the IIUM efforts to become the central player in recapturing the historical and central role that Islam had once played in all fields of knowledge to benefit all of mankind.
"This city will bear witness to the progress of Malaysia as a modern state that truthfully embodies the values of moderate Islam," he said at the launch of the Islamic City in conjunction with IIUM's 30th anniversary at its Gombak Campus, near Kuala Lumpur.
Also present were IIUM president and advisor to the government on social and cultural affairs, Tan Sri Dr Rais Yatim, and IIUM rector Prof Datuk Seri Dr Zaleha Kamaruddin.
The Islamic City, to be built on 17.6 acres (7.1 hectares) at an estimated cost of RM800 million, would comprise an Islamic Centre, a medical centre, serviced apartments, a convention centre, a hotel, a shopping mall and a food court.
The project, which would use water as its underlying concept, was expected to be fully completed within five to seven years.