The $1.4 billion facility will be part of the New York Sports and Convention Center.
The football team has been playing its home games at Giants Stadium in East Rutherford, N.J., since 1984. The Jets' lease at the New Jersey stadium runs out in 2008.
"When I became owner of the team in 2000, I pledged that my highest priority was to bring the Jets back to where they belong, right here in Manhattan," Jets owner Woody Johnson said. "Today was a long time in the making, but well worth the wait for a home to call our own."
Gov. George Pataki was among the officials on hand for the announcement. He said the new facility "will host dozens of events throughout the year and generate tens of millions of dollars in annual revenue to the city and state."
Officials said it was hoped the project would help the city in its efforts to attract the 2012 Summer Olympics. The International Olympic Committee meets in May to choose the finalist cities.