Organisers FIFA announced details of what will be the largest prize pot in club football for the newly-expanded 32-team tournament.
FIFA is understood to be setting aside an additional $US100 million ($A159 million) for solidarity payments to clubs who have not qualified.
"The FIFA Club World Cup will not only be the pinnacle of club football, but also a vivid demonstration of solidarity that will benefit clubs at large to a scale that no other competition has ever done," said FIFA president Gianni Infantino.
"All revenue generated by the tournament will be distributed to the participating clubs and via club solidarity across the world as FIFA will not keep a single dollar. FIFA's reserves, which are there for global football development, will remain untouched."
The revamped Club World Cup will take place in the United States, beginning on June 14 and running until July 13.
City and Chelsea will be involved as a result of their Champions League successes in 2023 and 2021 respectively.
Other notable European teams to feature include Real Madrid, Bayern Munich, Paris Saint-Germain, Inter Milan, Juventus and Atletico Madrid.
It is not yet clear how much clubs will receive for their participation but it will be a significant windfall.
The funds have been guaranteed after a broadcasting deal was reached with streaming platform DAZN last year.
The tournament has been a controversial addition to the calendar, particularly in European circles, due to concerns about player workload in an already crowded schedule. The finalists will play seven matches.
There has also been limited enthusiasm in Europe for an event perceived as lacking the intensity of the Champions League.
City manager Pep Guardiola, however, has noticeably been talking it up of late.
He has even suggested that he could prioritise it over the start of the 2025-26 Premier League season, which begins on the weekend of August 16-17.
Asked last month if he might rest his players for the tournament, Guardiola said: "No, I don't think so. It is important for the club, financially and for the prestige.
"After we'll see if I give extra time to arrive late - maybe for the first games of the Premier League (some will) arrive a little bit later."
FIFA has also confirmed a new women's Club World Cup will be established in 2028, featuring 19 teams and taking place every four years. A new Champions Cup, involving the champions of each of the six confederations, will take place in non-Club World Cup years from 2026.
"Women's football has reached new heights at national-team level, and now it's time for global competitions that showcase the best clubs from around the world," Infantino added.
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