Orizzonte Sistemi Navali is a joint venture between Italy's Fincantieri and Selex Sistemi Integrati companies.
The ship will be built at Fincantieri's Italian shipyards, Navaltoday.com Web site reported.
Fincantieri didn't give further details but analysts said that, as Fincantieri has already constructed three San Giorgio class amphibious transport ships for the Italian navy, it is likely that this is the class of vessel that Algeria has ordered. In June, Africa Intelligence reported that Algeria was examining the idea of buying a San Giorgio class vessel.
San Giorgio class amphibious transport ships can carry a battalion of troops as well as up to 36 armored vehicles or 30 tanks, three landing craft in a floodable stern dock, and several helicopters, including three Sea King or EH 101 Merlin helicopters or five AB 212s, which can operate from a carrier-style flight deck.
The San Giorgio class ships are armed with an Oto Melara 76/62 gun on the gun deck on the bow and two Oerlikon 20mm cannons for close-in defense.
The San Giorgio class propulsion units are two 16,800 horsepower GMT A 420.12 diesel engines supplied by Fincantieri's Diesel Engine Division, capable of propelling the vessel at 21 knots.
Algeria is steadily upgrading its navy's capabilities. Aside from the Orizzonte Sistemi Navali order, last month Algeria signed an agreement with the Russia's United Shipbuilding Corp. and state arms exporter Rosoboronexport for two new Tiger class corvettes.
Britain's Jane's Information Group reported that Algeria has been interested in acquiring Tiger missile frigates since early 2006.
The Project 20382 Tiger corvette is an export model of the Russian navy's Project 20380 Steregushchy class, which is the Russian navy's newest corvette class.
In 2010 Algeria took delivery of two Russian-built Kilo submarines under a $400 million contract. The two boats joined two Russian-built Project 877EKM Kilo diesel electric submarines, which Algeria received in 1987-88.
Flush with revenue from energy exports, the Algerian navy recently has expanded its capabilities to cope with rising problems including smuggling, illegal migration and local terrorism, threats affecting Algerian harbors, maritime communication routes and vessels transiting the Straits of Gibraltar, which require the Algerian navy to field naval forces to protect the nation's 620 miles of southern Mediterranean coast.