The project, part of the company's 'Better Air Now' initiative, will begin from India and is focussed on New Delhi, Gurugram and Faridabad which are among the world's most air polluted cities.
The first IKEA product prototypes based on rice straw will be ready by the end of 2018 and the ambition is to start selling the products in IKEA India during 2019-2020, and gradually include more markets, the company said in a statement.
"We know that burning of rice crop residue is a major pollution source and with this initiative we hope that will change," said Helene Davidsson, Sustainability Manager, South Asia at IKEA Purchasing.
"If we can find a way to make use of rice straw, it would become a valuable source for the farmers instead of being burnt, which in the end also would contribute to better air for people," Davidsson added.
Rice straw is a rice harvesting residue and is traditionally burned, contributing heavily to air pollution and smog in India.
According to World Health Organisation, around 90 per cent of the people worldwide breathe polluted air, which is estimated to cause seven million deaths per year.
IKEA aims to work closely with central and state governments in India, private companies, innovators, NGO's, the UN, universities, suppliers and farmers, to contribute to villages reaching zero rice straw burning.
The company has set itself a goal of using only renewable and recycled materials by 2030 by phasing out hazardous chemicals and tackling air emissions.
"IKEA works continuously to contribute and enable healthy and sustainable living. One of our main priorities is clean air and the 'Better Air Now' initiative is an important step on this journey," said Lena Pripp-Kovac, Sustainability Manager, Inter IKEA Group.