The Olympics doesn't allow sponsorship.
McIlroy, 25, from Northern Ireland, was eligible to play for Great Britain or Ireland and his choice has been the subject of ongoing speculation.
At one stage, McIlroy said he might not participate to avoid offending anyone.
"I have been thinking about the decision a lot and remembered all the times I represented Ireland as an amateur," he said on Wednesday.
"I've played for Ireland my whole life and there's no reason to change that now - it's just a continuation of what I've done.
"It's a decision I feel comfortable with and I'll be proud to represent Ireland in 2016.
"I'm 100% sure it's the right decision for me and I hope people respect my decision."
McIlroy revealed his decision on the eve of the Irish Open, which is being played at Fota Island in County Cork.
"Just because now that I'm playing golf for money and I'm a professional, I'm supposed to have this choice or this decision to make, where if you look at the rugby players, you look at cricketers or hockey players, they view Ireland as one, the same as we do in golf.
"I don't think there's any point to change that or go against that just because it's a different event or it's the Olympics."
The golfer, from Holywood in County Down, has twice played in the World Cup for Ireland - both times alongside fellow Northern Irishman Graeme McDowell.
He is one of the biggest stars in the game and won the US Open in 2011 and the US PGA Championship a year later.