BMW is planning to build the Mini Coupe and possibly a new SUV at its Oxfordshire plant, creating approximately 1,000 jobs.
The Cowley factory lost 850 jobs at the start of this year, but many of these workers are expected to be rehired to help build the two new models.
Business Secretary Lord Mandelson said: "The production of two new Minis is very good news for Oxford, and for the UK car industry.
“It is a demonstration of BMW's long-term commitment to the UK. British drivers have had a long love affair with the Mini and I'm sure that this will continue for many years to come."
BMW chief executive officer Norbert Reithofer told the Financial Times the move would entail new jobs and investments at the Cowley plant which is operating close to its capacity of 200,000 to 220,000 cars a year.
Reithofer would not confirm how big the increase in jobs would be in the UK or a production time-table for the new Minis.