Gates made the announcement Wednesday in Beijing, where World Health Organization Director-General Margaret Chan warned that emerging, hard-to-treat strains of tuberculosis are set to spiral out of control.
Chan told health ministers and senior officials from 27 countries worst-affected by the new drug-resistant strains of TB that they must make dramatic improvements in detecting infections and build stronger health care systems.
"Call it what you may - a time-bomb or a powder keg," Chan said at the opening of a three-day meeting on drug-resistant TB in Beijing. "Any way you look at it, this is a potentially explosive situation."
The Bill and Melinda Gates Foundation chose to fund the TB project in because the scale of the problem is great and the government has the ability to set an example for the world, Gates said.
"Because of its skill, its scale, its TB burden, its love of innovation, and its political commitment to public health, China is a perfect laboratory for large-scale testing of new tools and delivery techniques to fight TB," Gates said at a news conference.
The project will initially cover 20 million people and then be expanded to 100 million people over five years, Gates said.
TB is caused by germs that spread when a person with active TB coughs, sneezes or speaks. It's ancient and treatable but now has evolved into stronger forms: multidrug-resistant TB, which does not respond to two top drugs, and extensively drug-resistant TB, which is virtually untreatable.
Left unchecked, people with drug-resistant TB could potentially spread the disease to others, creating an epidemic in the highly mobile global economy. Even when detected, the infected have to switch to more potent and expensive medicines, posing a problem for many countries with underfunded health care systems.
Of the more than 9 million people around the world who contract tuberculosis every year, about 500,000 get multi-drug resistant TB.
Nearly a quarter of them are in China, where legions of rural migrants face an inadequate health care system.
It is also a problem in India, where rural health care is often poor and there is little control over the sale of anti-TB drugs; Russia, which faces a shortage of qualified medical staff and drugs; and South Africa, where the disease thrives amid an AIDS epidemic that has weakened the immune systems of people with HIV.
"I urge you to make the right policy decisions with appropriate urgency," Chan said to the officials. "At a time of economic downturn, the world simply cannot afford to let a threat of this magnitude, complexity and cost spiral out of control."
Chan said less than 5 percent of estimated cases of drug-resistant TB were being detected and fewer than 3 percent were being treated according to WHO standards.
Countries attending the meeting are expected to start drawing up five-year national plans to prevent and control the spread of drug-resistant TB. Many countries have been slow to act, said Medecins Sans Frontieres, also known as Doctors Without Borders, in a statement ahead of the Beijing meeting.
"The slow progress in treating people" was especially striking because many of the at-risk countries have thriving economies, said MSF's Tido von Schoen-Angerer. "They have the capacity to act, and need to make this a priority and put people on treatment."
TB is usually treated in six months with a $20 cocktail of four antibiotics, but its drug-resistant form takes up to two years to fight. Chan said the cost of treating drug-resistant TB can be as much as 200 times higher than normal TB.
Detecting drug-resistant TB quickly improves the chances a patient will survive and lowers the risk that the disease mutates further into an even more drug-resistant form of the disease.