Nissan is to build a new model at its Sunderland factory, a move that will create 2,000 jobs.
The Japanese carmaker, which will officially make the announcement later at the Geneva motor show, is set to invest £125m in the programme.
Production of the new compact car is scheduled to start from mid-2013, and the government is supporting the project with a £9.3m grant.
The jobs will be created at the factory, and among its suppliers.
Business Secretary Vince Cable told the BBC that the news was "a really great announcement".
He added: "It is very positive, but you can't see this in isolation, because the other big car companies have also make major commitments to the UK.
"Jaguar Land Rover, Ford, BMW Mini, are all putting in more money and bringing back supply chain."
The additional investment in Nissan's Sunderland facility will increase its workforce to 6,000, a record high for the factory.
The plant currently makes Nissan's Qashqai, Jule and Note models, producing 480,000 vehicles in 2011.