Montreal had originally won the right to host the event after a vote in 2001, but a major falling out between local organisers and the Federation of Gay Games saw Montreal have the event taken from them.
Organisers, however, have continued to plan an event under their own control for the same time as the original event.
Chicago will now host the official Gay Games VII.
Said Kathleen Webster, co-president of the federation: "Chicago Games Inc. put together an extraordinary proposal that demonstrates significant community support, a sound financial plan, and an international vision for Gay Games VII.
"We look forward to working closely with them to make the next Gay Games an outstanding event for all our participants."
Chicago has won the race to host the Gay Games in 2006 – beating off the challenge of Los Angeles to replace Montreal.
