Sun Laiyan, deputy director of the China National Space Administration, said the satellite, the first of a three-stage program, would be followed by the landing of an unmanned vehicle on the moon by 2010. Samples of lunar soil will be collected by 2020 in the final stage.
The final two stages of the project were still under review by scientists, however, Sun said.
The satellite would obtain three-dimensional images of the lunar surface, analyze the content of useful elements and materials on the surface, and probe the depth of the lunar soil and the space environment between the earth and the moon, Sun said at a press conference.
China would use a Long March III A launch vehicle for the project.
Sun described the programme as an important step for China's exploration into deeper space, saying the moon would provide "a good platform from which to probe even deeper".
China has previously said it expects to send more astronauts into orbit within two years following Yang's mission.
Space officials have said the Shenzhou VI will have more interior space to accommodate as many as three astronauts and that a space walk is high on their agenda.
The newest space power has already pushed ahead with exploration in tandem with other countries, launching Tuesday the first ever joint Chinese-European space mission -- a satellite designed to study the earth's magnetic field.
The high-altitude Explorer 1 was sent into orbit as the first of the two-stage "Double Star" project.
The country's desire to compete in space with other world powers has become a mammoth undertaking.
Since China's space program was set up in 1992 it has grown to employ tens of thousands of scientific, manufacturing and planning personnel in more than 3,000 factories.