The company said it would invest around €150 million to prepare for production of the Audi Q3 and A3 Sedan at a plant in Sao Jose dos Pinhais, in southern Parana state.
"By producing in Brazil, we will create the basis for further growth in the region," said Audi chief executive Rupert Stadler in a statement, adding that the carmaker planned to double its distribution network in the country by the end of the decade.
"With today's decision in favour of Brazil, we are ideally positioned in all BRIC countries," he said, referring to the emerging economies of Brazil, Russia, India, China and South Africa.
Audi will open its second plant in China by the end of the year, the statement added. A new plant is also to be built in Mexico with production there slated for 2016.
Tuesday's announcement marks Audi's return to the Brazilian assembly line after it stopped its production in the country in 2006.
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According to Dow Jones Newswires, Audi's return was influenced by the Brazilian government's decision to offer tax breaks to carmakers involved in local production.