Bentley says the development of a luxury car will result in 1,000 new jobs in the UK.
The carmaker is investing £800m at its headquarters in Crewe to develop and build the sports utility vehicle (SUV), which will compete with cars like the Range Rover.
Bentley's owner, Volkswagen, considered making the car in Bratislava, Slovakia, where it already builds SUVs.
The British government lobbied to keep the project in the UK.
Prime Minister David Cameron was at the announcement at Bentley's headquarters.
"I am delighted that Bentley will be building their new vehicle here, not only creating a thousand jobs, but safeguarding many more, as well as increasing training opportunities for highly skilled apprentices," he said.
Chairman of Volkswagen Martin Winterkorn said: "The Volkswagen Group believes in the UK as a competitive location for industrial production.
"Together we will make this new Bentley another true Bentley - powerful, exclusive and successful."
The new car is due to go on sale in 2016.
It will be Bentley's fourth model joining the Flying Spur, Continental GT and the Mulsanne.