The town donated the money for a 380-square-metre space on the premises of a former company. The entire project will cost about HRK 6 million.
Hasanovic said Dubrovnik was an example of the Islamic community's integration for all of Croatia and the European Union.
"I returned from Brussels a few days ago where I spoke to EU ambassadors at a working breakfast about how the Islamic community has integrated into Croatian society, where Islam and Muslims have found the best solutions," he said.
Vlahusic said Dubrovnik's new cemetery would have tombs for 160 Muslim families.
The Islamic community has been active in Dubrovnik 80 years.
(EUR 1 = HRK 7.6)