(CNN) -- Azerbaijan will make its Formula One debut in 2016 as the latest venue for the Grand Prix of Europe, it was announced Friday.
The race circuit will weave through the medieval streets of the capital city Baku.
An oil-rich nation situated on the western shores of the Caspian Sea, Azerbaijan had been mooted as a venue for next season by F1 chief Bernie Ecclestone.
However, this would have pushed the number of races on the calendar above the agreed limit of 20 unless others were dropped, thus requiring the consent of all F1 teams.
"We are very happy Baku has joined the Formula One family," Ecclestone said in quotes carried by UK news agency, the Press Association.
"This will be a street race, which will pass through interesting and picturesque parts of Baku, and will meet the current Formula One criteria."
The F1 brand has been pushing into Eastern Europe recently with Russia due to host its first race at a circuit built around the Sochi Olympic Park in October.
"Our location at the crossroads of Eastern Europe and Western Asia is a new frontier for Formula One racing," said Azerbaijan's minister of youth and sport Azad Rahimov.
"Azerbaijan is a modern European country that has established a reputation as a center of sporting excellence.
"The deal to bring Formula One to Baku is a very significant new chapter in our ongoing success to attract the world's largest sporting events to our country.
"The course we are planning to design will be similar to leading street circuits already on the calendar."
The event will become F1's latest street race, joining mainstays Monaco and Singapore already on the roster.
Friday's announcement also follows confirmation earlier this week that Mexico will be added to the F1 calendar for the 2015 season.
Previous hosts of the Grand Prix of Europe -- which was held as a standalone race between 1983 and 2012 -- include Spain, Germany and the UK.
The event was last staged in Valencia, also a street circuit.
Meanwhile, Mercedes' Lewis Hamilton edged out teammate and title rival Nico Rosberg to clock the fastest times in both of Friday's practice sessions for this weekend's Hungarian Grand Prix.
The British driver clocked a time of one minute 25.814 seconds in the first session when the medium-compound Pirelli tire was used, 0.183 seconds ahead of championship leader Rosberg.
When the drivers were allowed a run on the soft rubber, the quicker of the two choices this weekend, Hamilton improved to one minute 24.482, with Rosberg down by 0.238 seconds.
There were concerns for both drivers, however, with 2008 world champion Hamilton at one stage complaining of a loss of braking and his German colleague reporting issues with his car's engine.
Hamilton has a joint-record four victories at the Hungaroring, along with Michael Schumacher, and a repeat of last year's success on Sunday will help him cut Rosberg's 14-point advantage in the drivers' championship standings.
Only two drivers managed to get within a second of the all-conquering Mercedes duo in the afternoon session.
Four-time world champion Sebastian Vettel was 0.629 seconds off the pace in his Red Bull followed by Ferrari's Fernando Alonso, who was 0.955 seconds adrift.
McLaren's Kevin Magnussen was fifth fastest followed by the Ferrari of Kimi Raikkonen and Red Bull's Daniel Ricciardo, the latter fully 1.5 seconds down on Hamilton.
Raikkonen and Alonso had been third and fourth fastest in the morning.