The plant will be built together with local partners and will create 1,500 jobs, the press office of Bulgarian premier Sergei Stanishev said in a statement after he met with executives from the Chinese company earlier in the day.
The project is expected to kick off in early 2009, the statement said.
Bulgaria's Litex Motors, part of local diversified holding company Litex Commerce, said earlier this year it was in talks with Great Wall Motor and Chinese truck maker Beiqi Foton Motor to start assembling inexpensive vehicles in Lovech, in northern Bulgaria, and marketing them in the region.
Bulgaria, which joined the European Union in 2007, has no automotive production.
Great Wall Motor (www.gwm.com.cn) owns more than 20 subsidiaries with over 18,000 employees. Currently it has capacity to produce 400,000 units of vehicles a year and it plans to raise it to 500,000 units by 2010.