The new site will create about 4,000 direct jobs and up to 9,000 in the supply chain, with production expected to commence in 2026.
The company has said the facility will initially supply batteries for a new range of electric Jaguar and Land Rover models.
It is understood Tata Group selected the UK ahead of Spain after receiving significant investment from the UK government.
UK Prime Minister Rishi Sunak said: "Tata Group's multibillion-pound investment in a new battery factory in the UK is testament to the strength of our car manufacturing industry and its skilled workers.
"With the global transition to zero emission vehicles well under way, this will help grow our economy by driving forward our lead in battery technology while creating as many as 4,000 jobs, and thousands more in the supply chain.
"We can be incredibly proud that Britain has been chosen as home to Tata Group's first gigafactory outside India, securing our place as one of the most attractive places to build electric vehicles."
Natarajan Chandrasekaran, chair of Tata Sons, said: "Our multibillion-pound investment will bring state-of-the-art technology to the country, helping to power the automotive sector's transition to electric mobility, anchored by our own business, JLR.
"With this strategic investment, the Tata Group further strengthens its commitment to the UK, alongside our many companies operating here across technology, consumer, hospitality, steel, chemicals and automotive."