More than 60 naval vessels and private boats, led by a mega-yacht owned by Dubai's ruler, met the 70,000 ton ship in the Persian Gulf on Wednesday.
In the city's Rashid port, the legendary cruise ship was greeted by Dubai Police's marching band and fireworks.
In 40 years at sea, the luxury liner traveled 6 million miles, carried 2.5 million passengers and crossed the Atlantic more than 800 times.
"For QE2, we believe that life really does begin at 40," said Manfred Ursprunger, the chief executive of Nakheel's QE2 Enterprises, in charge of the ship's transformation.
Ursprunger said it will take two to three years to redesign the ship and make it into a hotel with dozens of rooms, several restaurants, a performance theater and a spa.
Some of the cruiser's famous quarters, like The Queen's Room, The Captain's Quarters and The Bridge will be preserved in its original form.
The ship's owner, Cunard, sold QE2 last year to a state-run conglomerate Dubai World for about $100 million.
Nakheel, a Dubai-based developer and part of Dubai World, plans to dock QE2 along Dubai's artificial, palm-shaped island.
Queen Elizabeth II, herself, launched the QE2 in 1967. Since it went into service in 1969, the QE2 has made at least 26 round-the-world voyages and weathered a 95-foot wave during an Atlantic hurricane.
In 1982, it was requisitioned as a troop carrier for the Falklands War that Britain fought against Argentina.
QE2 left Southampton, U.K. on Nov. 11 for her last journey to Dubai. It sailed for 16 days to its retirement spot in the Gulf via Lisbon, Rome and the Egyptian port of Alexandria.
On Thursday, Cunard will formally handover the ship's ownership to Nakheel, an arm of the Dubai World conglomerate.
By Associated Press Writer Barbara Surk