UFC officials announced the 185-pound contest on Wednesday. The UFC Fight Night card will be held at Jose Correa Arena in Sao Paulo.
Machida (21-5) is coming off a unanimous decision loss to Chris Weidman in a five-round title fight at UFC 175 in July. The fight was competitive but noncontroversial, as Weidman won via judges' scores of 49-45, 49-46 and 48-47.
A former light heavyweight champion, Machida is 2-1 since dropping a weight class last year. The 36-year-old Brazilian is the No. 4 ranked middleweight in the world, according to ESPN.com.
Dollaway (15-5) has broken into title contention at 185 pounds with wins in four of his last five contests. The only loss came in the form of a controversial split decision to Tim Boetsch at UFC 166 last October.
Fighting out of Gilbert, Ariz., the former collegiate wrestler is 9-5 overall in the UFC.
The UFC has two additional stops in Brazil scheduled for 2014, including a pay-per-view event, UFC 179, on Oct. 25 in Rio de Janeiro.