The hatchback vehicle, billed by the company as the world's first affordable mass-produced zero-emission car, will be built from early 2013. The annual production capacity will be 50,000 vehicles at Sunderland, which is the UK's biggest car manufacturing plant.
The site has already been named as the production centre for Nissan's lithium-ion electric car batteries, which is expected to create around 2,250 jobs.
Nissan said the production of the Leaf and batteries represents an investment of over £420m in the factory. This is backed by a British government grant of a £20.7m, and a proposed finance package of up to £197m from the European Investment Bank.
The UK will be the third country to produce the all-electric vehicle after Nissan's Oppama plant in Japan and the Smyrna, Tennessee, factory in the United States.
Nissan's senior vice president Andy Palmer said the Leaf will go on sale in Japan, the US and some European markets at the end of the year.
The firm has not yet revealed the cost of the vehicle yet.