Psy will perform the hit, which made history as the most-watched video on YouTube, at a Chinese New Year party on the northern island of Penang on February 11, said Loh Hock Hun from the Malaysian Chinese Association (MCA).
The organisers hope to attract some 60,000 people including Prime Minister Najib Razak, Loh said. He could not say how much the concert, to be staged by the Barisan Nasional coalition of which the MCA is part, would cost.
Some 25 percent of Malaysia's 29 million people are ethnic Chinese and celebrate the lunar new year.
Najib, who must face tough elections by June at the latest, hopes to improve on his coalition's worst ever poll performance in 2008. Those aged below 40 make up 40 percent of the electorate.
In 2008, the coalition lost its traditional two-thirds parliament majority and control over five states including Penang, to a resurgent opposition amid voter complaints that Barisan Nasional leaders seemed too aloof and corrupt.
South Korean pop music is popular in Malaysia with a recent show, the annual Golden Disk Awards featuring performances by Super Junior and other acts, drawing thousands of fans.
Psy, who is slated to perform in Brazil's carnival celebrations next week, is also expected to take the stage in Malaysia in
March for a music show at the Sepang International Circuit racetrack.
Psy made Internet history last December when "Gangnam Style" -- featuring his signature horse-riding dance -- clocked more than one billion views on YouTube.
