The work to build General Motors' new Astra model is to be shared by plants in Poland, Germany, Sweden and the UK.
GM plants across Europe had been vying for the new Astra
In the UK, where GM trades as Vauxhall, the new Astra will be manufactured in Ellesmere Port, Cheshire, from 2010.
The move safeguards the survival of the site, which has long been threatened with closure. The loser is Belgium, which also used to make the Astra.
US group General Motors has been struggling against mounting losses and rising competition from Asian firms.
The Astra is GM's best-selling car in Europe, selling almost half a million vehicles last year. On the continent, the cars are sold under the Opel brand.
GM Europe president Carl-Peter Forster made the announcement following talks with worker representatives in Belgium.
Winners and losers
A total of 3bn euros (£2bn) will be invested in the Astra project across Europe, while the UK operations are also expected to get a government grant.
The decision to base Astra production at the UK site will lead to the equivalent of an entire production shift - corresponding to about 1,400 jobs - being abolished at the company's factory in Antwerp.
By contrast, it will lead to a shift being reinstated at the group's site in Merseyside - a move that was warmly welcomed by the government and union leaders.
Other sites that will be working on the new "compact" car model will be Bochum in Germany, Gliwice in Poland and Sweden's Trollhattan factory.
GM Europe has cut about 12,000 jobs since 2005 as part of efforts to make regional operations profitable again.
The operation only returned to the black last year for the first time since 1999, making a profit of $227m (£116m).
Parent company GM itself has closed 12 plants in North America and cut more than 34,000 jobs in a bid to cut $9bn from operating costs after unveiling a $10.6bn net loss for 2005.
Wirral South MP Ben Chapman, who has nearly 300 constituents employed at the Ellesmere Port plant, said it was "great news for the local and regional economy".
"And of course I am delighted for my constituents and their families whose livelihood comes from working at Vauxhall," he added.
"Contrary to much apparent doom and gloom elsewhere in the industry, this secures a bright future for car manufacturing in Merseyside and Cheshire."