German sports and luxury carmaker Porsche will invest 1bn euros (£691m; $1.2bn) developing a four-door coupe that will be on the roads by 2009.
Porsche wants to protect its exclusive brand heritage and image
One of the few remaining independent marques with a long racing history, Porsche wants to reduce its dependency on pure sports cars.
The Panamera coupe will be Porsche's fourth base-model in production, alongside the 911, Boxster and Cayenne.
It will compete against Mercedes, Maserati, Aston Martin and Bentley.
The decision to branch out has taken a long time and has been hotly anticipated.
Pictures of the new vehicle have already appeared in the motoring press, though the specification of the engines has been a more closely guarded secret.
Seen as a successor to the now discontinued 928, the Panamera will have room for four adults and luggage.
Porsche said it expects annual sales of about 20,000 worldwide and wants demand to be more steady than for 911s and Boxsters.
Sales of smaller sportier cars tend to be cyclical and trail off in times of economic uncertainty.
Analysts said that the success of the company's large off-road style vehicle, the Cayenne, convinced the managing board that there was the steady demand needed to make production profitable.
"We indeed took a lot of time making the decision, but we now know that the Panamera fits to Porsche as it has all typical sports car genes," chief executive Wendelin Wiedeking said.
Porsche is often referred to as the most profitable of carmakers, and its management is very careful not to make decisions that could hit either its brand name or balance sheet.
This product conservatism has paid off and the company has seen sales rise over the last year, despite a general slowdown in consumer demand for cars.
Driving growth have been sales of the new, revamped 911, while the lumpy Cayenne is proving to be Porsche's best-seller.
The company said it will not unveil the new Panamera at the Frankfurt auto show in September where its new Cayman coupe, a derivative of the Boxter, will be unveiled.