The King of Pop, who quit the US after being cleared of child sex abuse in June, is expected to live on the quarter-acre site permanently.
The secluded area is situated on Bahrain's Amwaj Islands, a project of three man-made islands that has taken five years to complete.
Jackson's purchase includes two separate villas with seaside views, the New York Post reported.
The affluent island features top restaurants, a private hospital and school, parks, golf courses and private boat moorings.
Jackson has been living in Bahrain as a guest of the country's royal family and has kept a low profile except for several trips to London.
Source: News Limited/eMJey