Simoncelli, 24, was killed when he was struck by Colin Edwards and Valentino Rossi after a crash in Malaysia earlier this month.
Team boss Fausto Gresini initially planned to attend the final event of the season without competing but they will now take part.
"We made this choice as it is what Marco would have wanted," said Gresini.
"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.
"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."
Hiroshi Aoyama will take part in the Moto GP event and Michele Pirro and Yuki Takahashi will race in Moto2.
Gresini saw another of his riders, Daijiro Kato, killed in 2003 and has been deeply affected by the loss of his number one rider.
He told Italian newspaper Corriere dello Sport: "Everything happened so fast. I'm lost for words.
"I know our job is dangerous, that risk is part of the game, but you always hope nothing happens.
"When it does happen and you find yourself in the middle of it, everything changes, it's difficult to accept it.
"The crash was caused by a sequence of incredibly negative circumstances.
"Marco was spontaneous, he would always do what he thought, with a great heart and always radiant. I can't remember him getting angry even once.
"He was always honest with himself and with the others, a guy who loved challenges, and we, his team, were just an instrument to realise his dreams and to unleash his passion."