It will run in 2011 from June 30 to July 5, with a preview on June 29.
The inaugural Masterpiece fair was held in June this year in an impressive semi-permanent structure on the site of the former Chelsea Barracks, but this site was only ever a short-term measure.
The new Royal Hospital site will accommodate in the region of 150 exhibitors selling art, antiques and contemporary design, compared with 113 at the 2010 fair.
Fair director Nicola Winwood said the move would allow the fair to increase the number of exhibitors.
"The Royal Hospital Chelsea buildings and grounds are the ultimate masterpiece – making it the ideal venue for London's newest fair," she told ATG.
Peter Currie of the Royal Hospital Chelsea said: "We are very much looking forward to working with Masterpiece London in 2011 and beyond. We believe it will prove to be extremely beneficial to the local community."
Thomas Woodham-Smith, chairman and one of the founders of Masterpiece London, has stepped down from his role as managing director of London dealers Mallett (although he will continue to act as a consultant to the company) in order to concentrate on the Masterpiece fair.
A number of 2010 dealers are confirmed to return in 2011, including Dickinson, Steinitz, Vanderven & Vanderven and A La Vieille Russie. Among the new exhibitors will be Noortman Master Paintings, Marlborough Fine Art, Daniel Katz Ltd and Rolls-Royce.
The fair has also announced that the official supported charity in 2011 will be CLIC Sargent, the UK cancer charity for children and young people.