The statue, depicting Jackson in one of his most iconic poses, will stand on the banks of the River Thames, adjacent to the stadium's Riverside and Hammersmith stands.
Al Fayed had initially planned on placing the statue outside Harrods, but following his sale of the Knightsbridge landmark store in May last year, switched the site to Craven Cottage.
Jackson visited Craven Cottage on April 10th 1999 as a guest of Al Fayed to see their 2-0 victory over Wigan in League Two.
The singer also visited Exeter City in June 2002 as a guest of celebrity spoon-bender Uri Geller, who was a director of the Grecians at the time.
Jackson was later made an honorary chairman of the Devon club.
"Michael Jackson was truly a legend, a term used too often in this modern world saturated in the hyperbole surrounding celebrity," added Al Fayed.
"He was my friend, a man with whom I shared many happy memories and who died a tragic and untimely death.
Fans cheer Michael Jackson at the 02 arena
"He left behind a legacy of music so vast it takes one's breath away; from a precocious talent to an ingenuity and groundbreaking modernity that shall never be repeated.
"It shall often be imitated, but it will never be replicated.
"Michael Jackson was, and shall always remain, one of a kind."
Jackson is recognised as one of the world's most successful recording artists, whose contribution to music, dance and fashion made him a hugely recognised global figure.
In a career spanning four decades he has sold an estimated 750m records worldwide, with 13 number ones in the United States and seven chart-toppers in the UK.
His album "Thriller" has the distinction of being the biggest selling of all time worldwide, with more than 70m copies sold.
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