The festival, called Made in America, would be sponsored by Budweiser and also run concurrently in Philadelphia. Performers have yet to be announced.
"This is the most creative spot on the face of the Earth, and L.A. is the world's music capital," Garcetti said.
Made in America is expected to draw as many as 50,000 people to the 12-acre park on Aug. 30 and 31.
The park is "accessible to everyone and it's inclusion, not exclusive," Jay-Z said.
Several protestors showed up at the event to voice their dismay.
"I believe that 50,000 people convening in a small place like this is a public nuisance," protestor Jackie Tallarico said.
Los Angeles City Councilman Jose Huizar said he won't issue any permits for the event planned in his district until more community input is gathered. He voiced concerns about street closures for up to 10 days that may negatively impact residents and workers in Downtown Los Angeles.
"We have questions over whether that is the best use for Grand Park, the so-called 'people's park.' If it is, what is the public – that is the City and Downtown Los Angeles community – getting in return?" Huizar said in a statement.
As of Wednesday, Ticketmaster was selling tickets on its website for $125, plus $30 fees.