Italian Prime Minister Romano Prodi has said Brazilian and Italian energy companies are planning to build four biodiesel plants in Brazil together.
Mr Prodi made the announcement after meeting the Sao Paulo Federation of Industries on his tour of Brazil.
The four biodiesel plants are likely to cost about $480m (£244m).
European Union (EU) leaders have undertaken to produce 20% of their energy from renewable sources such as biodiesel and ethanol by 2020.
Brazil is the world's second-biggest ethanol producer and the top exporter.
Brazilian cars have been running on biofuels for years and the country's expertise is in great demand.
The new plants will be built as part of an agreement between Italian energy company Eni, which is 30% government-owned, and Brazil's Petrobras, which is 60% state-owned.
Mr Prodi is also expected to reach a deal to build biofuel production facilities in Africa, probably starting in Angola.
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