The new model will be built at the Longbridge plant in Birmingham, its "spiritual home" for nearly 40 years, and will safeguard or create an estimated 8,000 jobs directly and indirectly.
Artists' impressions suggest that the new car will be much sleeker and rounder than its predecessor. A spokesman maintained, however: "It will be a completely new car but it will be unmistakably a Mini."
The Mini was designed by Sir Alec Issigonis and first appeared in 1959. It quickly became the icon of 1960s fashion, featuring in the film The Italian Job and went on to reach sales of five-and-a-quarter million.
Production of the latest version - re-engineered and back in its most memorable incarnation, the Mini Cooper - is running at about 20,000 a year. But Rover, now under the ownership of BMW of Germany, said production of the new Mini was likely to reach at least 100,000 a year. Output could be even higher, depending on when Rover re-enters the US market.
The production line is expected to be built in 1999 and manufacture will start early the following year. The Mini's existing one litre A series engine will be replaced by a new 1.4 litre four-cylinder engine to be manufactured in a $500m plant that BMW and Chrysler, the US car maker, are to build in South America. The plant, which will produce 400,000 engines a year, will probably be located in Brazil, although other Latin American locations are being examined. The plant will produce engines for both Rover and Chrysler.
The new Mini line is expected to provide 2,000 jobs directly at Longbridge and a further 6,000 among component suppliers in the West Midlands and elsewhere.
Dr Walter Hasselkus, Rover's new chief executive, said: "I hope today's news will end speculation that the Mini could be built anywhere other than in the UK. This is yet more evidence of BMW's confidence in Rover."
The go-ahead for the new model will come as welcome fillip for Rover after reports that its German parent company was deeply unhappy about its investment. BMW has said it does not expect to make a profit from Rover this century. The 1997 Mini, which went on show yesterday at the Parts Motor Show, includes a driver's airbag - a feature once thought impossible to engineer into a car so small, multi-point fuel injection, alloy wheels and wood facia and sells for pounds 8,995.Reuse content