“We are very pleased that CATL has decided to build a factory for battery cells in Erfurt,” capital of Thuringia state, the Munich-based firm said in a statement.
More details of the deal were expected to emerge later Monday as Chancellor Angela Merkel welcomes Chinese Prime Minister Li Keqiang to Berlin for a meeting of both country's cabinets.
BMW said it had struck a deal with CATL to buy batteries worth €4 billion – with €1.5 billion of sales in Germany and €2.5 billion in China.
The Chinese firm will supply the cells for the electric Mini and for BMW's upcoming “iNext” electric limousine, slated for production from 2021.
CATL's Erfurt factory will make Thuringia “one of the most important European locations for battery technology,” regional economy minister Wolfgang Tiefensee told news agency DPA.
Industrial workers' union IG Metall also hailed the deal, which it said could create around 1,000 new jobs in the high-tech sector.
Carmakers are squeezed by looming stricter EU emissions targets and years of scandal over cars built to cheat diesel emissions tests.
German firms have been hard at work lining up their supply chains to produce massive volumes of electric vehicles, hoping to solve both problems at a stroke.
Top of the to-do list has been striking deals with battery makers and securing supplies of raw materials for the cells, especially cobalt.
As well as BMW, Mercedes maker Daimler is also weighing a deal with CATL according to German business daily Handelsblatt, while Volkswagen already has a contract with the Chinese firm as well as with South Korea's Samsung and LG.
Politicians, industry leaders and worker representatives have frequently mooted a homegrown German option for battery production, but massive car parts supplier Bosch shied away earlier this year, calling it too risky an investment.