The conservative kingdom aims to turn the islands into a luxury "semi-autonomous" tourist destination.
According to Arab News, Branson is the first international investor to commit to the project.
Branson set his eyes on the project during his recent trip to Saudi Arabia, where he visited the Red Sea and the tombs at Mada’in Saleh - a UNESCO World Heritage site.
"Quite an experience to be in Saudi Arabia..."
"...change is taking place step by step."
He described his experience on Virgin’s website, calling it “a country where great change is taking place step by step.”
“During my visit, I had the chance to enjoy a fascinating tour of Saudi Arabia that few people have got a chance to see before,” Mr Branson wrote in a social media post.
“We were taken to the Red Sea, where a huge project to turn a giant lagoon into a beautiful tourism destination is underway,” Branson said.
Earlier this year, Saudi Arabia announced plans of turning 34,000 square kilometres (13,127 square miles) of its Red Sea coastline into high-end luxury resorts.
Tourism is considered to be a vital part of employment for Saudi Arabia’s young population, with the Red Sea project expected to generate 35,000 jobs.
Foundations of the Red Sea development are scheduled for the third quarter of 2019. The first phase is expected to be completed by the end of 2022, including the development of hotels and luxury residential units, as well as all logistical infrastructure - including air, land, and sea transport hubs.
Saudi Vision 2030
Under Saudi Vision 2030, a key goal is to increase the number of tourists in the kingdom.
Currently, while millions travel to Saudi Arabia each year, this is primarily for religious tourism to the holy sites of Mecca and Medina.
Ever since the ambitious Vision 2030 was revealed, many have been speculating how the kingdom will open up to encourage non-religious tourists.
The Red Sea development could clearly bring plenty of beachgoers to the kingdom, but it all hinges on how things move forward.