Dubbed Promoted Videos in the UK, the service will use AdWords to allow advertisers to create a campaign that is keyword-targeted and priced on performance.
Similar to sponsored links on Google, advertisers will only pay for an ad when a user clicks on it.
Advertisers will also be able to add a "Call-to-Action" clickable overlay to their ad, allowing them to drive viewers to a third-party website.
Suveer Kothari, YouTube UK head of sales, said that with one billion videos being shown daily on the video-sharing site, there was "massive potential for advertisers to find their audience".
Promoted Videos is available to all AdWords advertisers in the UK, France, Italy, Germany, Spain and the Netherlands.
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