The $1.25 million tournament will be played at The Australian Golf Club from November 27 to 30 and is jointly sanctioned by the PGA Tour of Australasia and OneAsia.
The 25 year-old, three-time Major champion from Northern Ireland won the 2013 Emirates Australian Open by a stroke over Australia's Adam Scott in front of huge crowds at Royal Sydney Golf Club.
"I'm really looking forward to coming back to Sydney in November to defend my Emirates Australian Open title," McIlroy said.
"I had a terrific experience last year in front of great crowds. They really loved the showdown between myself and Adam. And it proved to be a really important win for me. I believe my return to form was given real momentum in Australia last year. I've heard great things about The Australian Golf Club since the Jack Nicklaus redesign and I look forward to competing in front of the Aussie fans again later in the year."
McIlroy won the 2012 US PGA Championship at Kiawah Island and the 2011 U.S Open at Congressional among seven PGA Tour victories to date.
With his win in Liverpool, he joined the record books with Jack Nicklaus and Tiger Woods as the only three players to have won three Major championships by the age of 25.
New South Wales Deputy Premier and Minister for Tourism and Major Events Andrew Stoner said, "I'm delighted to confirm that World No.1, defending Australian Open Champion and current British Open Champion, Rory McIlroy of Northern Ireland, will return to play exclusively in Sydney at the 2014 Emirates Australian Open to be held from 27 "“ 30 November," Mr Stoner said.
"Following his recent success, McIlroy is in career best form and this will be the only opportunity for sporting fans in Australia to see him in action against some of the world's best golfers."
Mr Stoner said, "The NSW Government has worked hard to secure the best available talent for the Emirates Australian Open of Golf in Sydney in order to ensure this event remains the best in the Asia-Pacific region."
"In Sydney and NSW we are fortunate to be able to access many stunning, world class golf courses and with the 2014 Australian Open set to be held at The Australian Golf Club, players and fans alike are in for a treat. With a bumper winter of sport currently on offer in this State, this announcement reinforces Sydney's position as Australia's premier home of the most exciting major sporting events."
Golf Australia CEO Stephen Pitt said the Emirates Australian Open was fast shaping as an unmissable event with McIlroy's confirmation.
"We are thrilled that Rory is able to return to Sydney in November. His commanding wins at the Open Championship and the Bridgestone Invitational were another demonstration of his extraordinary talent which has made him the household name that he is," Pitt said.
"As the defending champion and based on the volume of responses we had from the fans, sponsors and TV viewers, we were obviously very keen to have Rory come back to Australia. We're excited about the potential of Rory rekindling the final round battle from 2013 and the stage is set for a huge week at The Australian Golf Club."
The Emirates Australian Open will be broadcast live on the Seven Network across all four days.
Tickets for the championship go on sale via Ticketek on 1 September.
The Championship is owned by Golf Australia and is managed by World Sport Group with the assistance of TRP Sports.
The 2014 Emirates Australian Open will be played at The Australian Golf Club from 27-30 November.