The stand-up will star in a one-hour Secret Millionaire spoof on the channel in 2013.
Malachy's Millions will feature Kay as Malachy Mooney, a self-made millionaire who built his fortune through his coaching series 'The Mooneys - Taking You Away From Everything You Know'.
For one week, Malachy trades his luxurious lifestyle to go undercover in a former mining town in North England, in order to change the lives of particular locals.
The special was commissioned by Channel 4's Deputy Head of Comedy Nerys Evans, and will be produced by Baby Cow.
Kay said: "The script by Jo Enright and Lorna Burke made me laugh a lot and I also liked the opportunity of playing a character again."
Evans said: "It's fantastic to have Peter starring in this beautifully written comedy from Baby Cow. We can't wait to have him back on our screens in this laugh out loud one off comedy special."
Baby Cow's Gill Isles added: "It's an amazing opportunity for Baby Cow to collaborate with Peter Kay on this genuinely funny script. Working with Channel 4 and a comedy actor of Peter's calibre makes this a dream project for us".
Peter Kay first spoke about the project during a BBC radio interview last month.
Kay's previous TV projects include Phoenix Nights and reality contest spoof Peter Kay's Britain's Got the Pop Factor... and Possibly a New Celebrity Jesus Christ Soapstar Superstar Strictly on Ice.