Caterpillar (NI) Ltd will assemble wheeled material handling machines that will be sold in international markets.
Production of the yellow Cat wheeled material handlers, which are used for scrap sorting and handling and forestry applications, will begin in the region from mid-2014.
Part of the money will go towards training the estimated 100 people required to run the operation.
Robert Kennedy, Caterpillar Northern Ireland Operations Director, said: "All Caterpillar Northern Ireland locations will benefit through the diversification of manufacturing, enabling us to continue to develop the skills and expertise of our local work force."
Jody Howard, General Manager for Caterpillar's Industrial & Waste Group, added: "This expansion recognises the high standard of the facilities, processes and skills in Northern Ireland.
"We are making investments with a long-term view towards meeting our customers' needs, while building an industry-leading range of products and support services from the base of operations in Northern Ireland."
Caterpillar is globally renowned for engineering and manufacturing excellence so I am delighted with today's news which is a boost for the wider manufacturing sector in Northern Ireland.
Enterprise Minister Arlene Foster
The announcement was made in Illinois where First Minister Peter Robinson and deputy First Minister Martin McGuinness visited the company's headquarters.
Mr Robinson said: "The project is especially important as it has the potential to help attract additional projects from the wider Caterpillar family.
"This new project for Northern Ireland will also offer our local workforce the opportunity to develop key transferable skills that will add value to our manufacturing sector, bringing further economic benefit."
Mr McGuinness added: "Meeting with the company in the US has allowed us to cement relationships with management and assure them of our continued support for Caterpillar's growth and development."
DUP East Antrim MLA Alastair Ross, who is also the Assembly Private Secretary to the DETI Minister, has also welcomed the news.
Mr Ross accompanied DETI Minister Arlene Foster and Invest NI Chief Executive Alastair Hamilton in a meeting with senior management at Caterpillar in the US last year in an effort to protect the operations in Larne, Monkstown and Belfast.
"It would be my hope that Caterpillar will develop further activities in Northern Ireland, and the company know that the Northern Ireland Executive stand ready to support and work with the company to realise the economic potential of our local plants and workforce," he said.
UUP MLA Roy Beggs Jnr said the announcement by Caterpillar is very good news for his East Antrim constituency.
"We wait to see how many new jobs are created from this announcement, and how many will come to the former FG Wilson plants in Larne and Monkstown in my East Antrim constituency.
"Nevertheless it is very good news which hopefully will help secure the existing jobs and provide re training opportunities."
Enterprise Minister Arlene Foster and Employment and Learning Minister Stephen Farry have also welcomed the announcement.
Invest Northern Ireland has offered Caterpillar over £1m to secure the project. The Department for Employment and Learning (DEL) has also offered £220,000 through its Assured Skills Programme.