The money will go towards the introduction of new technically-advanced aluminium vehicle architecture in future models.
The first new model to showcase this will be a mid-sized sports saloon car from Jaguar to be launched in 2015.
Jaguar Land Rover chief executive Dr Ralf Speth announced the news at the Frankfurt Motor Show.
"Today's announcement signals Jaguar Land Rover's ambitions to push the boundaries and redefine premium car ownership," he said.
"At Jaguar Land Rover we place the customer at the heart of everything we do and the introduction of a world class all-new aluminium vehicle architecture means we will be more competitive, flexible and efficient delivering exciting new products for our customers around the world.
"Jaguar Land Rover is a business driven by design, technology and innovation and this investment and level of job creation is yet further evidence of our commitment to advancing the capability of the UK automotive sector and its supply chain."
Business Secretary Vince Cable said: "Jaguar Land Rover has been experiencing great success over the last couple of years but this ground-breaking project takes Jaguar on to the next level.
"This all-aluminium architecture project typifies the type of innovative and high value R&D that the UK excels in and government is supporting through the automotive industrial strategy."
JLR has three advanced manufacturing facilities in the UK - in Solihull and Castle Bromwich in the West Midlands, and Halewood on Merseyside.
The company's Solihull manufacturing facility has been home to Land Rover since production commenced in 1948 and currently builds the Defender, Discovery, All-New Range Rover and Range Rover Sport.