"We hope to establish close relationships with the schools around us," he said.
The academy would operate as a not-for-profit school under charitable status, and would accommodate about 100 year 11-13 boys from across the country.
The academy was originally intended to be built in Christchurch, but the earthquakes prompted them to relocate the project to Dunedin, Dr Alayan said.
The trust wanted to establish the academy because it believed Muslim children attending state secular schools were subjected to an educational environment which pressured them to adopt values which were contradictory to Islamic values, such as evolution theory, sexual relations outside of marriage and drinking.
Despite the academy's aim to provide a high-quality education with an emphasis on the Islamic value system, Dr Alayan said the New Zealand national curriculum would be taught by about 15-20 staff, who would include qualified Islamic studies and Arabic language teachers.
The academy will be the South Island's first Islamic school.