South Korean steelmaker Posco is to build a plant in the Indian state of Orissa which will be the Asian nation's biggest direct foreign investment.
India's demand for steel is growing along with the economy
Posco will invest up to $12bn (£6.5bn) in the steel plant over 15 years, creating about 48,000 jobs locally.
The deal also grants Posco a 30-year mining lease to extract local iron ore to supply the steel plant.
It has however prompted protests by opposition parties, who say it will exhaust iron ore deposits in 20 years.
"The project is going to change the face of Orissa," said Orissa's chief minister Naveen Pattnaik.
"Apart from revenues for the state government, it will generate hugely-needed employment opportunities," he said.
The Posco plant will be in the port city of Paradip.
It is expected to employ about 13,000 people directly, and to create jobs for 35,000 more in the east Indian state.
Initially, Posco plans to invest $3bn to build a plant capable of producing three million tonnes of steel a year, then to phase in extra investment to expand the plant to 12 million tonnes.
But the deal has attracted controversy, the BBC's Sandeep Sahu reports.
Opposition parties in Orissa have announced a series of state-wide protests against the project, saying it will exhaust Orissa's iron ore resources within 20 years.
India has been slow to open its markets to foreign investment, and privatisations in key industries, such as oil and heavy engineering have proved politically sensitive in recent years.
India's demand for steel is growing rapidly as strong economic growth has increased demand for cars, fridges and building materials.
The market for steel is also strong elsewhere in Asia, particularly in China, contributing to high steel prices in the last two years.
Tata, one of India's top producers, last week clinched a deal to invest up to $1.2bn to build three steel plants and develop iron ore mines in Iran to boost supplies to India.