Tesla chose between locations in California, Texas, Arizona, Nevada and New Mexico for the site of the factory, which is expected to generate $100 billion in economic impact over the next 20 years.
Nevada Gov. Brian Sandoval said the facility — which will be built about nine miles east of Reno — should directly generate about 6,500 jobs and indirectly create up to 22,500 jobs.
"It's a great day in Nevada, and it's a great day for Nevada," he said.
To entice Tesla to select Nevada among the contenders, the state offered $1.25 billion in tax breaks and other incentives meaning the manufacturer will essentially operate 10 years tax-free.
The new factory is aimed at producing batteries that will make the company's electric car — the Model 3 — cheaper.
"The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come," Tesla CEO Elon Musk said in a statement.