Around 1,000 workers will produce the new model.

The as yet unnamed car is expected to roll off the production line from January 2006.

Around 1,000 employees will work on the compact five-door hatchback, and a possible 200 new jobs could be created.

Many more jobs at Nissan's local suppliers will also now be assured by the project, in which the company is investing £125m.

The announcement of the new car was made on Thursday at the Paris Motor Show.

'Overall competitiveness

Nissan's executive vice president, Patrick Pelata, said the car would be based on the 'Tone' concept he was unveiling.

Mr Pelata said: "The niche market where Tone would compete is forecast to grow by a factor of four from 2002 to 2007."

Nissan Manufacturing UK managing director, Colin Dodge said: "I'm delighted that we will be producing the new car here in Sunderland.

"We've been working very hard to increase our overall competitiveness for some time now.

"It's very satisfying to see our efforts rewarded."

Nissan's operations in Sunderland began in 1984, with the first vehicle coming off the production line in 1986.

Since then the plant has become the UK's largest, and has produced more than 3.75m vehicles.