Dubai says more than $4 billion of the injection will be given to Dubai World's property firm, Nakheel, to repay its Islamic bond that matures Monday.
The remaining funds will go towards additional expenses.
News of the last-minute bailout caused Asian stocks to rebound and pushed European shares up for a third straight session.
Markets in the UAE also rose, with Dubai's index moving up by 10 percent and Abu Dhabi's jumping by seven percent.
Despite the good news, Algebra Capital Managing Director Dino Kronfol says Dubai is not out of the woods yet.
"This is not something that is going to be resolved in a matter of weeks. It's going to take some time," said Kronfol. "It's going to involve restructuring and we'll have to see how that transpires. But nonetheless, this is a positive development today."
The situation is completely different from just a few weeks ago, when Dubai World shook up global markets by asking for a standstill on its $26 billion debt.
The government of Dubai made matters worse when it announced it would not guarantee the state-owned company's bills.
Dubai World's creditors still need to approve the standstill and effectively have until December 28 to make a decision. That is when the grace period of Nakheel's bond ends.
The government of Dubai has issued a new law allowing the conglomerate to file for bankruptcy if its restructuring is not successful.
But Kronfol says, if the process focuses on necessary aspects, it will succeed.
"If the restructuring actually deals with Dubai's contingent liabilities, as a long-term solution, this actually really will help put the whole debt situation of Dubai behind us and really allow the markets to look more positively at 2010 and beyond," he said.
Government sources say Dubai World's restructuring process could include asset sales, but they would be limited to the Nakheel and Limitless companies and not include Istithmar World, which owns U.S. Luxury retailer Barneys.