Prix de l'Arc de Triomphe hope Al Kazeem will begin his stud career at The Queen's Royal Studs in Sandringham in 2014.
Owner-breeder John Deer of the Oakgrove stud in Chepstow confirmed the news.
"I completed the contract to sell him to the Queen to stand him at Sandringham Stud in Norfolk," he said.
Al Kazeem has won three Group One races in 2013, and is among the leading British hopes for Europe's richest race in Longchamp this Sunday.
It had been unclear how the ownership plans would be finalised, but the horse has been bought outright by the Queen.
Deer will retain some breeding rights to send some of his mares to Al Kazeem.
"I don't know what their plans are, but they'll probably syndicate him. It's very exciting and I'm very pleased," added Deer.
Al Kazeem is the first stallion acquired by the Royal Studs since 2005 Epsom Derby winner Motivator, who has since relocated to France, leaving Al Kazeem to stand alongside 20-year-old Royal Applause in England.
The Roger Charlton colt has won half of his 14 starts, earning nearly $1.6m (£962k) in prize money.
A Group Two winner last season, he has blossomed as a five-year-old in 2013, defeating dual Classic winner Camelot in the Tattersalls Gold Cup and also winning the Prince of Wales's Stakes and Coral Eclipse Stakes.
"The Arc is likely to be his last race and he will then go to Sandringham pending passing the vet's check," added Deer.