"The decision to participate was not an easy one, but we have made this choice as it is what Marco would have wanted," team owner Fausto Gresini told the sport's official website www.motogp.com on Monday.
Initially Simoncelli's team had been due to miss Valencia following the tragedy in Sepang on October 23.
"Going out on track at Valencia is definitely the best way to honour him by doing what he most loved to do: Ride and experience the world of MotoGP," said Gresini.
"This is why I believe that the best show of affection that we can make to Marco is by lining up our teams and riders for this race."
Japanese rider Hiroshi Aoyama will start in the MotoGP race with Michele Pirro and Yuki Takahashi competing in Moto2.
"'Super Sic' will be present in the hearts of Hiroshi Aoyama, Michele Pirro and Yuki Takahashi, and I am sure that they will give him a most fitting tribute with their performances on Sunday," Gresini concluded.
Simoncelli lost his life when crashing on the second lap at the Sepang circuit where he had clinched the 2008 Moto2 title.
His team's presence on the grid in Spain promises to serve up a hugely poignant conclusion to the 2011 MotoGP season.