The new factory aims to produce 300,000 vehicles a year and expects to employ about 4,000 people.
President Donald Trump tweeted the decision was “a great investment” in US manufacturing.
The two carmakers have also agreed to join forces to develop electric car technology, and Toyota is to take a 5% stake in Mazda.
Change of plan
Earlier this year, Mr Trump said Toyota would face hefty tariffs on cars built in Mexico for the US market if they were made south of the border.
He campaigned on promises to increase manufacturing and expand employment for American car workers.
Toyota had initially been planning to produce Corollas at its new $1bn plant currently under construction in Mexico, but this will now shift to the US.
A new Mazda SUV crossover will also be made at the new US factory, with the two companies hoping production will begin in 2021.
Toyota’s Mexico plant will produce its Tacoma truck instead.
The co-operation between Toyota and Mazda on developing electric vehicles comes as the industry adapts to the tightening of global emissions regulations.
Toyota has set a goal for all of its vehicles to be zero emission by 2050.
More carmakers are facing large research costs as they look to improve battery-powered cars.
Toyota and Mazda also plan to work together on developing in-car information technologies and automated driving functions, as competition intensifies over the development of self-driving vehicles.
As well as Toyota taking a 5% stake in Mazda, the tie-up will also see Mazda take a small stake in its larger rival.
Toyota, Japan’s biggest carmaker, has been forging alliances with smaller Japanese rivals for several years.
It already owns a 16.5% stake in Subaru, where it has a development partnership.
Toyota is also seeking some form of research and parts supply deal with Suzuki in an attempt to tap into its expertise in emerging Asian markets.
Chris Richter, managing director of investment company CLSA, said: “By buying a 5% stake (in Mazda), Toyota takes Mazda off the table rather than having it sit out there like a free agent which could someday be used against them.”
Mazda also stands to gain a production stake in the US, which is its biggest market. At the moment it ships all vehicles sold in the US from its plants in Japan and Mexico.
It, along with other Japanese rivals, also lacks the funds to develop electric cars on its own.
Janet Lewis, head of Asia transportation research at Macquarie Securities, said: “Mazda needs electrification technology.
“In the past they’ve pooh-poohed electric vehicles, they’ve felt that they can make internal combustion engines more efficient, but the bottom line is that globally you need to have this technology.”
[ Source : bbc ]