The auto electronics plant near Klagenfurt would initially employ 200 workers. Magna founder Frank Stronach and Carinthia governor Joerg Haider have reached an agreement on the plan.
Observers expect incentives to flow from the provincial government, as five locations in Austria had been competing for the factory.
So far, the amount of the investment is being kept confidential. It is believed that it will come under Magna's Donnelly subsidiary, not Magna Steyr. Donnelly is a producer of rearview mirrors and other products.
Magna is also considering construction of a new vehicle-assembly facility in eastern Europe.