Nissan is to build a new compact car at its Sunderland factory from 2010.
The Japanese car giant announced the £55 million investment, £6.2 million of which is coming from the British government, as Prime Minister Gordon Brown visited its European design headquarters in west London.
Mr Brown said the move would guarantee jobs and bolster the UK's manufacturing sector.
"I'm delighted to congratulate Nissan on this new model, which will bring to Sunderland something that's going to guarantee jobs in the distant future.
"Sunderland's success shows what an innovative, talented and highly-committed workforce can achieve, and re-affirms the UK's position as a strong player in the global car industry."
Nissan's Sunderland plant produced a record 374,000 vehicles in last financial year.
The company is the largest vehicle exporter from the UK, with around 80% of production sold abroad.
Together with the engine assembly plant and other facilities, the Sunderland site employs 4,700 workers. The workforce was expanded recently to meet demand for the Qashqai model.
The new vehicle will take up the manufacturing capacity created when production of the current version of the Micra ends at Sunderland in 2010.
Business Secretary John Hutton welcomed the investment, describing it as "great news for Sunderland, for jobs in the area and for the regional economy".
