The factory in Leipzig, where Porsche's Cayenne and Panamera models are already assembled, will be expanded and construction is scheduled to begin this year, pending the necessary approvals from authorities.
"The decision for this location is proof of our trust in the skills and qualifications of our Leipzig associates, and at the same time another contribution to the economic advancement of the region," Matthias Müller, Porsche's chairman, said in a statement.
Both body assembly and paint finishing work will take place at the new plant.
Currently around 650 employers work at the Leipzig facility.
Leipzig Mayor Burkhard Jung said: "The decision of Porsche proves yet again that Leipzig is an attractive, cosmopolitan city and, therefore, an international business site with a future."
In addition to the 1,000 new jobs in Leipzig, Porsche manufacturing facilities in Zuffenhausen and Weissach near Stuttgart will also see new hires.
The new crossover Cajun SUV will enter production in early 2013 and will be marketed as a cheaper alternative for those who want the Cayenne, Porsche's best-selling model, but can't afford it.