The new City Rover will cost about £6,000
MG Rover is unveiling its new small car at its Longbridge factory in Birmingham.
The car will be built in partnership with the Indian company Tata and manufactured at its plant in Pune in India.
Rover plans to import about 50,000 of the cars a year and sell them in Europe through their existing dealerships.
The hatchback is based on Tata's Indica model, built in India, and will be the first model to be entirely developed in India.
MG Rover says the cars will retail for around £6,000 in the UK.
The manufacturer hopes the new model will fill the gap left by the end of production of the Rover Metro.
Tata is a $9bn conglomerate based in India which has interests including steel, communications, consumer products, chemicals, hospitality and IT.
It is made up of 80 companies and employs 225,000 people.
MG Rover employs 6,500 workers at its Longbridge plant, which produces 170,000 vehicles a year.
MG Rover has described the deal with Tata as a "positive step for the company" which will benefit all its employees.