The announcement, coinciding with the third death anniversary of Thackeray on Tuesday, came at a joint media briefing by Fadnavis and Shiv Sena president Uddhav Thackeray at the heritage building.
"Several locations were considered and all were good for the memorial. But Shivaji Park is the Sena's 'karma bhoomi' and we accept the mayor's bungalow here for the Thackeray memorial," Thackeray said.
Fadnavis said the memorial would be built through a trust which will be headed by Uddhav Thackeray and the funds would be allocated by the state government.
"A detailed plan on the memorial shall be ready within two months. Though there is no time frame for its completion, we are hopeful it will be done within a year, during our (government's) tenure," Fadnavis said.
He said the main mayor's bungalow will not be demolished and the memorial will be constructed around it.
Thackeray expressed his gratitude to Fadnavis for clearing the pending proposal.
Thackeray pointed out that the Shivaji Park vicinity will now have memorials of two prominent Hindutva personalities -- V.D. Savarkar and now Bal Thackeray.
Thackeray was accorded a rare public funeral at Shivaji Park in the presence of over a million followers after his death on November 17, 2012.
Shivaji Park was also the venue of his much-anticipated annual 'Dussehra Rallies' which has set the tone for state politics for over four decades.
A memorial for the late B.R. Ambedkar is coming up nearby.
The Shivaji Park is renowned as the cradle of Indian cricket, where greats like Sachin Tendulkar, Sandeep Patil, Ajit Wadekar, Ajit Agarkar and others cut their teeth in the game.
The area is also home to people like Maharashtra Navnirman Sena (MNS) president Raj Thackeray and the landmark Shiv Sena Bhavan, the Shiv Sena's state headquarters.