Your Film Festival will take submissions of up to 15 minutes in length between Feb. 2 and March 31.
Fifty semi-finalists will be selected, and YouTube users will further narrow the field to 10 by voting for their favorites on the channel www.YouTube.com/yourfilmfestival.
The winner will receive a $500,000 grant from YouTube to produce a film with director Ridley and Tony Scott's production company, Scott Free Productions.
The 10 finalists will be flown to the 69th annual Venice Film Festival, where their films will be screened in August.
"Through this program, YouTube will give filmmakers the opportunity to reach a vast audience, screen their work during the Venice Film Festival and potentially be rewarded in a career-changing way," Robert Kyncl, global head of content at YouTube, said in a statement.
In 2010, YouTube released the film "Life in a Day," which was co-produced by Scott. The feature-length documentary stitched together videos submitted by YouTube users.
Anyone can submit a film, but Your Film Festival is particularly hoping to reward young filmmakers and producers. YouTube said that it will be doing outreach at both the Sundance Film Festival and South By Southwest to spur filmmakers to participate in Your Film Festival and urge them to consider YouTube a pathway to industry attention.
The Associated Press contributed to this report.