The star will perform on the main stage on Sunday night, while rap star Snoop Dogg has been confirmed as Saturday night headliner.
There will also be a performance by hip hop legends the Wu Tang Clan.
This year's Bestival is the tenth and organisers said they were planning for it to be a birthday spectacular.
Sir Elton said: "I haven’t played any of the major festivals in the UK in recent years, so when the opportunity to play Bestival came up I was very interested.
"I’ve heard that the Bestival audience comes in fancy dress and I can’t wait to see that - they must all look amazing from the stage.
"At various times I wore enormous feathered head-dresses, cloaks, hot pants, jumpsuits, clown suits, a Minnie Mouse outfit, French maid, The Eiffel Tower and The Statue of Liberty.
"Wearing fancy dress makes us all feel less inhibited so I think it’s a great way to enjoy live music.
"2013 marks the 40th anniversary of the release of the Goodbye Yellow Brick Road album, so you can expect to hear several tracks from that album.
"My shows always involve audience participation, singing and dancing, so make sure there is plenty of room for movement inside those fancy dress costumes!"
Bestival curator Rob da Bank said: "After ten years of running our beloved festival, Bestival is still as psychedelically wondrous to us as the September day in 2004 when we first threw open the gates.
"2013 will be a vintage year. No increase in capacity, but more land, a raft of exciting changes around the site (including some great new spaces) and all dressed and made up in Bestival’s signature style.
"Band and DJ-wise we’ve cast our net far and wide. As ever, Bestival 2013 will be a magical mix of the old and the new, the vintage and classic rubbing shoulders with the ultra-modern and leftfield.
"From one of the biggest-selling artists of all time and certainly the best at fancy dress, Elton John, through the party blazing hip-hop of Snoop Dogg, through some amazing and rare shows, to the newest of the new bands and acts that I’m so excited about like Jagwar Mar, Merchandise and Cashmere Cat plus literally the finest selection of house and techno DJs we've ever had - from Richie Hawtin and Carl Cox to Besti stalwarts Erol Alkan and Annie Mac - this will be our best Bestival yet so don't miss out!"
As well as confirming two headliners, the team behind Bestival revealed a host of other acts due to appear over the weekend.
They include UK festival exclusives from M.I.A, The Flaming Lips and Franz Ferdinand, at well as Smiths legend Johnny Marr, The Knife, Tom Odell, Peace, John Cooper Clarke, The Stripes, Chic, Lissie, The Wonder Stuff, Caravan Palace, The Cuban Brothers, Matthew E White, While She Sleeps, Merchandise, Mikill Pane, True Tiger, Sexy Sushi, Is Tropical, Skaters, Lulu James, Swim Deep, Fleetwood Bac, Jaipur Brass Band, Kawa Circus, Lewis Watson, Jaws and J-Cats.
DJs include Richie Hawtin, Carl Cox, Mark Ronson vs Zane Lowe as A-Yo DJ, Erol Alkan, Annie Mac, Marcel Dettman, DJ Yoda, The Daft Punk Tribute Night (in The Hidden Disco), Redlight, Bondax, Heidi, Ed Rush, Fake Blood, Jesse Rose, Justin Robertson, Andrew Weatherall & Sean Johnston’s A Love From Outer Space, Ben UFO, Cyril Hahn, Daniel P Carter, Catz N Dogz, My Love Is Underground, Cashmere Cat, Krankbrother, Ben Pearce, Dollop DJs, Alexander Nut, Roska, Bodhi, Kry Wolf, Coley From Luv*Jam, Crispin J. Glover and Bad Zuke.
Elton John. Picture by Emerson Loew.