Listed on the Shanghai Gold Exchange, the benchmark price is derived from a 1 kg-contract and was set at 256.92 yuan ($39.70) a gram on Tuesday, Reuters reported. The price will be set twice a day.
China is the world's largest gold producer and jostles with India for the tag of the biggest consumer of the precious metal globally.
Eighteen institutions including top Chinese banks such as Bank of China and ICBC, as well as Standard Chartered and ANZ will join the benchmark fixing.
The yuan gold fix will come up against the London Bullion Market Association's spot benchmark set twice a day with 12 participants.
Swiss trading house MKS' chairman Marwan Shakarchi said China's growing consumption of gold supports the set-up of the fix.
"To have a benchmark price in renminbi ... will help both consumers and producers in this part of the world," said Shakarchi. MKS is one of the 18 trading members of the yuan gold benchmark.
Although the impact of China's gold fix will likely be limited now in a closed monetary system, there is potential for opportunities in the future when the currency achieves full convertibility, Shakarchi indicated.
"Ultimately...I see them uniting the (offshore yuan) CNH and CNY (onshore yuan). (The currency) will be fully convertible and it will be easier to import gold into China," added Shakarchi.