Analysts said that as the Somali government has regained its grip on the country, now is the right time for major countries to reconnect with the nation and help with its rebuilding efforts.
Foreign Ministry spokesman Hong Lei said at a regular media briefing that a team from the ministry will leave on Tuesday to reopen the embassy.
"The move reflects the importance China attaches to its relations with Somalia and its firm support for the nation's reconstruction," Hong said.
The announcement comes shortly after Washington said in June that US President Barack Obama is considering sending the first US ambassador to Somalia since 1991, although no date has been set.
Somalia was the first nation in East Africa to establish diplomatic relations with the People's Republic of China, but the embassy was closed in 1991 when a civil war broke out.
In 2012, Somalia made a major breakthrough in its peace process by establishing its first official government and parliament in 21 years.
Hong said that since then the country has entered a "new historic era of national reconstruction", which brings fresh opportunities for its relations with Beijing.
He said China will use the embassy reopening to contribute to "lasting peace and reconstruction".
Cui Yongqian, former Chinese ambassador to the Democratic Republic of the Congo, said the reopening comes at the right time.
"The Somali government is now capable of exercising power in an effective way in many parts of the country. The security of our diplomats can be assured. If we hesitated in reopening the embassy, the absence of Chinese diplomats would have negative results on interaction between China, Somalia and even the region," Cui said.
Xu Weizhong, executive director and research professor at the Institute of African Studies under the China Institutes of Contemporary International Relations, said Beijing has long maintained channels of communication with Somalia even during the civil war.
He said China traditionally establishes embassies in every country with which it has diplomatic relations.