"We want madness, originality, irreverence," Russian-born novelist and Charlie writer Iegor Gran, told France Info radio. "We can't let the dreary have the monopoly of French literature."
The paper received many drawings from young people "many of them spontaneous, with a very free spirit" after last year's attack, which left 12 dead, editor Laurent Sourisseau, whose nom de plume is Riss, told Le Parisien daily.
The Charlie Hebdo Literary Prize will be a way "to continue the dialogue between this generation and Charlie, a paper that many people discovered at the time of the attacks", he said.
It will be open to all French-speakers between the ages of 12 and 22, in any country.
All forms of humour will be welcome, editors say, adding that they want above all to be surprised.
The subject of the first contest will be "What if the baccalaureate was replaced by...", inviting an irreverent take on the exam that students take when they finish secondary school in not more than two pages.
Essays can be submitted to the site between 24 February and 20 April.
A panel of Charlie Hebdo journalists and cartoonists will select 10 finalists and three of them will be chosen by a vote by the public in May to win 1,000 euros each.