Nissan plans to invest $200 million to build a new compact hatchback car at its factory in Sunderland, England.
Production of the car, which will compete against models such as the Volkswagen Golf and Ford Focus, will start in 2014, Nissan said on Tuesday.
The hatchback marks Nissan's return to Europe's mainstream compact segment quit by the company in 2006 after it ended UK production of the Almera.
Currently, the Qashqai compact crossover, built in Sunderland, is the automaker's entry in Europe's second largest segment by volume after subcompacts.
Nissan will continue to build the Qashqai in Sunderland, along with the Juke crossover. The factory will begin production next year of the Leaf electric car for European markets, as well as a subcompact based on the Invitation concept that was unveiled at the Geneva auto show in March. The subcompact will replace the Note.
The factory's annual capacity is being expanded to 550,000. Last year, the plant built 480,485 vehicles. An additional shift will be added to help raise production capacity for the new model to around 80,000 units a year, Nissan said.
Nissan did not release details of the compact, which industry observers expect will be based on the second-generation Tiida already on sale in some global markets.
More details about the car, including its name, pricing, engine line-up and equipment levels will be released closer to the sales launch, the automaker said.
IHS Automotive analyst Ian Fletcher said Nissan's decision to rejoin the highly competitive mainstream compact segment in Europe was "curious" considering that demand for the Almera contracted so much that Nissan dropped it from most European markets.
However, the new model may help balance demand for the yet-to-be-proven market for the Leaf EV, he said.
"IHS Automotive expects the new hatchback to be built on the B platform which is shared with the Leaf and could share many of the components used to build this vehicle and in turn used to balance demand levels and gain the best profitability levels," Fletcher said in a statement.
Reuters contributed to this report