The new route will open in June and will carry more than 260 passengers on daily flights.
The Airbus A330-200 aircraft can carry a 168-ton cargo and will enable Scottish businesses to connect across the Gulf region, Asia, Australia and Africa, Etihad said.
Edinburgh is Etihad's first Scottish base and its third in the UK along with London and Manchester.
James Hogan, chief executive of Etihad Airways, said: "The two cities share strong tourism links and the UAE is Scotland's primary trade partner in the Gulf region, which will fuel strong demand among business and leisure travellers on our non-stop service.
"Travellers will also benefit from convenient connections to many other destinations, both on our own global network and through our relationships with other airlines."
He added that a second Etihad link between Scotland and Abu Dhabi would be introduced in the next five years.
Transport Minister Keith Brown said: "This new route between Edinburgh and Abu Dhabi is fantastic news for Scotland, building on our already strong links with the United Arab Emirates and providing a major boost to our international connectivity.
"By removing the need for extra connecting flights, we make Scotland a more attractive place to do business and make it even easier for visitors from around the globe to come and taste the fantastic tourist experience we have to offer."
Gordon Dewar, chief executive of Edinburgh Airport, said he is delighted to welcome the Etihad service.
"The airline will fly direct to Abu Dhabi, giving the people of Scotland access to the United Arab Emirates and offering our passengers even more choice," he said.
"With direct flights to over 100 destinations from Abu Dhabi, Etihad Airways increases our global connectivity, ensuring Edinburgh Airport truly is where Scotland meets the world."
It comes as Wizz Air announced plans to increase services at Glasgow Airport with flights to Katowice and Poznan in Poland from October.
Francois Bourienne, the airport's commercial director, said: "Wizz Air has been a successful addition to our airline roster, providing connectivity to key Polish destinations and growing its passenger traffic every month since its arrival here in March 2013.
"The decision by Wizz Air to launch new services to Katowice and Poznan later this year is great news for travellers in both countries, with Katowice in particular set to be popular with Scots travelling to nearby sites of cultural and historical significance such as Krakow and Auschwitz.
"Today's announcement by Wizz means Glasgow Airport will soon be serving more Polish cities than any other Scottish airport."