The winner of the so-called 'InnoApps' contest will also get the chance to market his or her winning entry.
The idea of the challenge, launched at an event in Parliament on Wednesday, is to tap the best young entrepreneurial talent in Europe.
It is the third edition of the competition. The theme this year is 'smart and safe cities'.
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The safe aspect of this, according to Tony Graziano, who heads up the EU affairs and communications office for Huawei, one of the partners involved, is particularly appropriate given the recent terrorist attacks on Paris and Brussels.
The contest will last for nine months and young innovators and entrepreneurs will compete with their ideas for apps on the smart/safe cities theme, he said.
The 'InnoApps' is said to be the only pan-European competition to develop innovative apps for smart cities. It is organised by the European Young Innovators Forum (EYIF) in partnership with Huawei.
The aim is to contribute to the development of a "more socially inclusive society" in Europe by fostering eSkills, increasing eParticipation and promoting entrepreneurship for young people.
The organisers say that in contrast to other competitions, InnoApps provides "long-term mentoring and commercialisation support for the winning team, to create a feasible and concrete pathway for the winning app developers to bring to the market their creativity."
Graziano said, "The InnoApps competition has produced some great winners over the last few years and we have been able to consider some really great, innovative ideas.
"One thing I am sure about, is that we will attract some highly promising entries for the 2016 edition, the focus of which is smart cities and, more specifically this year, in making our cities safer."
He added, "Although smart and safe cities are still relatively new concepts, based on the Internet of Things, we believe that they will become a really important part of our lives as connectivity increases and 5G mobile technology is rolled out in and around the year 2020."
Huawei, he noted, has made "great strides" in providing the platforms for the innovative new apps being developed in this area, saying it had installed "smart city solutions" in more than 100 cities in over 40 countries worldwide.
"And our safe city solutions already serve more than 400 million people worldwide.
"Many sectors are included by the smart and safe city concept and the opportunities are virtually endless."
The company, he said, is working with Amsterdam, The Hague and Groningen, towns in the Hesse region of Germany and cities such as Hannover and Gelsenkirchen, and islands such as Sardinia and Malta in a bid to make their communities smarter and safer.
"So I think it is exciting to frame the InnoApps 2016 competition in this context because there are so many opportunities in the smart city and safe city domain for young apps developers to make a difference."
The idea, he said, was to support young people by giving them a platform at which to aim their new ideas and then help them transform their creative ideas into viable business propositions.
"Nurturing young talent and fostering eSkills is one of the most important investments we, as an international and a European company, can make.
"Both these areas - smart cities and eSkills - are fundamentally important for EU growth and employment initiatives, such as the Europe 2020 strategy, the digital single market and the European pact for youth."
He added, "By the time the live-pitching final in February 2017, many ideas will have been presented, many candidates mentored, and the new apps for smart cities that developed for this competition will have been further improved to embrace yet more advanced technologies.
"This is what is so exciting about working with young innovators with an eye on the future. Who knows what marvels they will produce to help move us forward."
Further comment came from EPP group MEP Adina Valean, a Vice President of the European Parliament, who said she fully supported the competition, saying it would help cultivate interest in the telecoms and IT sector.
She said, "Coming up with 'smart' ideas is essential but, in itself, that is not enough. Young innovators, in creating and developing a successful business, often also need mentoring. What's also needed is a mentality shift so that we are not afraid to talk about those who fail. Failure is part of the process."
The short-listed candidates will be invited to Brussels for a two-day event later this year. The winner will get a €20,000 prize with €15,000 going to the runner up.