Helicopter manufacturer AgustaWestland will receive a cash boost of £50m, it will be revealed later today.
The Yeovil firm will establish a world-class civilian helicopter design and production line with help from the Government's Regional Growth Fund.
The Anglo-Italian company will receive two Government cash injections, one of which will develop a hybrid helicopter and aeroplane.
The news has been welcomed by Yeovil MP David Laws.
He said: "This is wonderful news for Agusta Westland and for the economy of Yeovil and South Somerset. This is a real game-changer for Yeovil – and is one of the most important announcements made during my eleven years as MP for Yeovil.
"Agusta Westland has done incredibly well to secure the largest amount of money from the Regional Growth Fund of any successful bidder in South West England. In addition, the company's investment from the Government is the third largest in England in today's announcement.
"I would like to congratulate all those at the company who worked on this bid, and indeed all employees of the company who work in Yeovil.
"Agusta Westland is already one of the world's top defence aerospace companies, and now we have a real chance to create a massive new civil helicopter business for Somerset and for Britain."