The £355 million (0 million, 560 million euros) facility will be based near Wolverhampton in central England, with work due to start early next year.
"We expect the engine manufacturing facility to create up to 750 highly-skilled engineering and manufacturing posts at Jaguar Land Rover, along with hundreds more highly-skilled manufacturing jobs in the supply chain and the wider UK economy," said Ralf Speth, chief executive of Jaguar Land Rover (JLR).
"This is truly exciting news and is a major commitment for our company.
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"As we invest £1.5 billion a year for the next five years in new product developments, expanding our engine range will help us realise the full global potential of both our Jaguar and Land Rover brands.
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Speth added that the new four-cylinder engines will increase JLR's capability to offer high-performance engines while ensuring continued significant reductions in vehicle emissions.
Len McCluskey, general secretary of the Unite union, said the news w