The new city will allow women's desire to work without defying the country's strict Islamic laws.
Sharia Law is the moral code and religious law of Islam dealing with crime, politics, and economics, as well as personal matters such as sexual intercourse, hygiene, diet, prayer, and fasting.
Although Saudi Sharia law does not prohibit women to work, figures show that only 15 per cent of women are represented in the workforce.
The plan coincides with the government's ambitions to get women to play a more active part in the development of the country. Among the stated objectives are to create jobs, particularly for younger women.
"I'm sure that women can demonstrate their efficiency in many aspects and clarify the industries that best suits their interests, their nature and their ability," Modon's deputy director-general, Saleh Al-Rasheed, said.
"We are now working on a second industrial city for women. We have plans to establish a number of women-only industries in various parts of the kingdom," the 'Daily Mail' quoted Rasheed, as telling Saudi daily newspaper Al-Eqtisadiah.
There will be women-run firms and production lines for women. As part of a mass overhaul of its workforce and its bid to get women into work, the state is also attempting to replace foreign salespeople with Saudi women.
This summer, women started replacing staff in cosmetics and perfume shops, only half a year after they replaced male sales staff in lingerie stores.
Last September, King Abdullah announced that women will be able to vote and run in the 2015 local elections.