The Baugur-owned toy retailer will open its first Middle Eastern store in Dubai in autumn 2007, with further store openings planned for Kuwait and Saudi Arabia.
The franchise agreement has been signed with Daud Investments LLC, which owns Middle Eastern franchises of McDonalds, Yo Sushi and GBK.
The contract will also allow the company to open airport stores in Middle Eastern countries.
Hamleys opened its first international stores in Denmark in 2005 under concession arrangements.
In a statement, the group said it was currently in discussions with potential new partners in India and China, and was getting considerable interest from a number of major franchise players.