Infiniti, Nissan's luxury brand, will build its first-ever premium compact car at its parent company's Sunderland manufacturing facility in the north east of England from 2015.
The announcement represents a £250m investment into the facility, and is expected to secure a further 1,000 jobs at Sunderland and across the UK.
The new car will produced from 2015 and will allow Infiniti to compete within the heart of the premium segment for the first time.
Nissan says when production begins, Infiniti will become the first new car brand to be manufactured in the UK on this scale in 23 years.
280 new jobs will be created at the Sunderland plant on top of an additional 1,000 jobs across the country. The factory will build 60,000 Infiniti models per year.
However, the news does mean that a C-segment hatchback previously announced for the plant in March will be manufactured elsewhere.
Owen Humphreys/PA Wire
Colin Dodge CBE, Nissan's executive vice president and chief performance officer (pictured), said: "This milestone, our first premium product to be manufactured at Sunderland, reconfirms our commitment to UK manufacturing and the ongoing success of the plant, which is moving up the value chain.
"Just as important, the new Infiniti, which will be exported around the world, is being developed with help from our London design centre and our European Technical Centre at Cranfield."
Attending a ceremony at Sunderland, business secretary Vince Cable said: "Sunderland will be the only place in the world to make this new premium compact car. Nissan in the UK goes from strength to strength - not only will the new car be made here and exported all over the world, the UK has already contributed to its design and development.
Prime Minister David Cameron added: "This announcement shows how the car industry in partnership with the Government continues to win important long term investment projects, in a tough competitive sector; helping the UK to get ahead in the global race."
The announcement coincides with the news that this year, Nissan's Sunderland Plant will produce more than half a million cars for the first time - the first UK manufacturer to achieve this milestone.
Sourcing a factory for the production of the new Nissan C-segment car will be decided and announced at a later date.