More than 1,600 jobs will be created at the Wearside plant and an estimated 4,500 in supply companies under an investment of £1 billion, including building a new-generation all-electric vehicle.
The news was warmly welcomed by the Government, the industry and unions representing workers in Sunderland, where Nissan has been building cars for 35 years.
Nissan chief operating officer Ashwani Gupta would not say how much financial backing the UK Government has given the project.
Roker's Tin of Sardines welcomes more than 17,000 customers in first two months of business opening at Sunderland seafront
The six premises in and around Sunderland recently awarded four and five star food hygiene ratings
See inside transformed Sunderland city centre property as it enters new chapter
Sunderland's Vaux brewery teams up with leading expert for guest beer toasting the past
The Sunderland mum who helped set up a business during pandemic - while nine months pregnant
Business Secretary Kwasi Kwarteng suggested that a significant sum of financial support from the Government has been committed to Nissan but declined to give a figure.
The carmaker will partner with Envision AESC, a global company in battery technology who will be building the gigafactory, and Sunderland City Council.
There will be three interconnected initiatives bringing together electric vehicles, renewable energy and battery production, which Nissan said sets a blueprint for the future of the automotive industry.
The new model will be a cross-over vehicle, but Nissan said it was too early to say when production will start.
Mr Gupta said this month was the 35th anniversary of the plant building its first car, adding: “This is a £1 billion birthday present for all of my colleagues here.”
Mr Gupta would not say how much financial backing the UK Government has given the project but called the scheme a “renaissance of the British car industry”.
Asked how much the Government has “stumped up”, he said: “Time will come we will discuss (it) with you.”
Mr Gupta said the Sunderland plant has already shown its capacity to adapt and transform, having built the ground-breaking Qashqai and Juke models.
He added that the new Nissan model will be a crossover vehicle but insisted that it is too early to say when it will come into production.
The £1 billion project is a reward for the dedicated workers in the North East of England, one of the business leaders behind it has said.
Lei Zhang, founder of the Envision AESC group which already makes electric batteries in Sunderland, saw parallels with the region’s coal and shipbuilding industrial history, with thousands of new jobs also being created in energy and transportation.
He said that history, with the region’s dedicated and skilled workforce, was a “really good launchpad” for a green industrial revolution.
Mr Zhang said: “North East wind farms have abundant resources, they are able to power this region and could make it the first net zero region in the UK, and could be for Europe.
NISSAN IN PICTURES: 35 years of car building on Wearside
“You have the DNA, the memory of the first industrial revolution which is a great asset when you are making wind turbines, gear boxes, generators, electric vehicle batteries, cars.
“You need a sophisticated, well-trained, disciplined, serious work force.
“You have the people here, you have the determination here.”
Mr Kwarteng said: “This fantastic investment by Nissan and Envision AESC represents a solemn commitment to the people of Sunderland, bringing further high-skilled jobs and turbocharging our plans to level up the North East.
“This is a huge step forward in our ambition to put the UK at the front of the global electric vehicle race, and further proof, if any was needed, that the UK remains one of the most competitive locations in the world for automotive manufacturing.
“I am extremely proud that Nissan has not only reaffirmed its belief in Britain, but is doubling down on its long-standing commitment to our country.
“The cars made in this plant, using batteries made just down the road at the UK’s first at-scale gigafactory, will have a huge role to play as we transition away from petrol and diesel cars and kick-start a domestic electric vehicle manufacturing base.”