The global chain, whose best-known product is the Big Mac burger in a bun, says it will be its first vegetarian outlet.
McDonald's, the world's second biggest food outlet after Subway, increasingly adapts its range to local demand.
Both India's Hindu majority and Muslims can eat the same meat-free dishes.
Religiously observant Hindus see cows as sacred and avoid beef, while Muslims view pigs as unclean and avoid pork.
According to the AFP news agency, McDonald's will open the outlet in the middle of next year, near the Golden Temple in the Sikh holy city of Amritsar in northern India.
Religious authorities forbid consumption of meat at the shrine.
A spokesman for McDonald's in northern India, Rajesh Kumar Maini, told the news agency: "There is a big opportunity for vegetarian restaurants as many Indians are vegetarian.
"At the moment, India is still a very small market - we just have 271 restaurants in India, and across the world, we have nearly 33,000."
The chain plans to open another vegetarian outlet in north-western India, near the Vaishno Devi cave shrine in Kashmir, which is a Hindu pilgrimage site that attracts hundreds of thousands of visitors a year.
McDonald's has moved to provide more salads and other healthier foods with less sugar, salt and fat in them, in response to public concerns about diet.
In India, its menu is typically 50% vegetarian.
Its signature dish in the country is the McAloo Tikki burger, which uses a spiced potato-based filling. It accounts for 25% of total sales.
Globally, the company plans to open around 1,300 new stores this year.
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