The team, which was officially approved by the IOC Executive Board and called Team of Refugee Olympics Athletes (ROA), will be made up from a pool of 43 prospective Olympians, already identified by the IOC and supported with funds to train.
Nomination criteria included sporting level, official United Nations-verified refugee status and personal situation and background, the IOC said.
"We have no target," Bach said when asked how many athletes would be in the team.
"It depends very much on the sporting qualifications. This team may end up between five and 10 athletes."
Hundreds of thousands of refugees, many from Syria, have crossed via Turkey and Greece into Europe.
The plight of those fleeing conflict, as well as economic migrants escaping poverty, has polarised opinion in Europe, with the amount of new arrivals stretching the European Union's asylum system.
"By welcoming ROA to the Olympic Games in Rio, we want to send a message of hope to all the refugees of the world," Bach said.
"Having no national team to belong to, having no flag to march behind, having no national anthem to be played, these refugees will be welcomed to the Olympic Games with the Olympic flag and with the Olympic anthem," he said.
ROA will be housed in the athletes' village along with all other national teams and will enter the stadium as the penultimate team at the opening ceremony, ahead of the host nation.
"This team will be treated during Olympics like all the other teams," Bach said.
"It will enjoy all the privileges like the other teams and athletes."
The athletes and the sports they will compete in will be named at the next IOC executive board meeting in June.
