General Motors Corp. will produce the new Chevrolet Camaro at a plant in Oshawa, just east of Toronto.
GM officials, senior government officials and union leaders made the announcement Monday.
The move came after the Canadian Auto Workers agreed to 2,500 early retirements to reduce costs at the plant to win the rights to make the new car.
The plant was scheduled to be closed in 2008 but now will stay open, saving about 2,700 jobs.
The automaker plans to revive the muscle car in 2008 with models hitting showroom floors in 2009.
GM stopped making the Camaro in 2002.
The automaker hopes a new Camaro will attract younger buyers and appeal to its traditional customers.