The project, to be run by the army, was seen a major step by new President Abdel Fattah al-Sisi to stimulate Egypt's struggling economy. The Suez Canal earns Egypt about $5 bill per year.
An official in the Suez Canal Authority told Reuters the new canal was set to boost annual revenues to $13.5 bill by 2023.
A new channel will be built, part of a larger project to expand port and shipping facilities around the canal.
"This giant project will be the creation of a new Suez Canal parallel to the current channel of a total length of 72 km," Mohab Mamish, authority chairman, told a conference in Ismailia.
He said the total estimated cost of digging the new channel would be about $4 bill and should be completed in five years, although Sisi had said he hoped it would be finished earlier.
Sisi also said that the armed forces would be in charge of the new project for security reasons. Up to 20 Egyptian firms could be involved but would work under military supervision, he said.
Egypt has planned for years to develop 76,000 sq km around the canal into an international industrial and logistics hub to attract more ships and generate income, Reuters said.
It was suggested at the launch event that the project would cut waiting times for vessels and allow ships to pass each other along the canal.
Mamish said the project would involve 35 km of "dry digging" and 37 km would be "expansion and deepening", indicating the current Suez Canal, which is 163 km, could be widened as part of the project.