Iran Khodro did not disclose when construction work would begin on the plant in Algeria.
The company already sells about 1,000 vehicles a year in Algeria through a network of 10 sales offices in Algiers, Vihren, Constantine and Annaba, and plans to double its number of outlets in the country.
The firm expects to produce 600,000 vehicles in the current Iranian year with the main plant in Tehran manufacturing about 520,000 vehicles. Iran Khodro also owns car plants in the Iranian cities of Khorasan and Tabriz.
It also expects to manufacture more than 20,000 vehicles in two overseas plants in Syria and Belarus.
The company said that it generated revenues of $575m from exports during the previous Iranian year.