Hydro-Quebec announced it will spend $1.9 billion to overhaul the aging Gentilly-2 plant near Trois-Rivieres, Que.
It is hoped the extensive renovations will extend the power plant's lifespan to 2040.
Hydro-Quebec described Gentilly-2 as a reliable and clean source of energy which helps stabilize Quebec's power grid.
"We'll go ahead with the renovation of Gentilly-2 because it's a plant that has been used safely for 25 years," the utility's president, Thierry Vandal, told a news conference.
"The site of the plant is very safe, as much for production as for storing nuclear waste.
Gentilly-2's future has been the subject of heated debate for several years.
Environmental groups such as Greenpeace object to keeping the plant open because of what they see as murky long-term plans for dealing with radioactive waste.
"(The government) has had a policy that won't accept a used-fuel waste site in Quebec," said Greenpeace energy campaigner Shawn-Patrick Stensil.
"Today, however, they have given the OK to producing more radioactive waste. That's hypocritical."
Businesses and unions welcomed the refurbishment project as a much-needed boost for the central Quebec region.
The renovations will result in about $600 million in spinoffs for Quebec and will create about 800 jobs over a 20-month period, in addition to the station's current staff.
Gentilly-2 came online in 1983 and produces about three per cent of the province's total energy output. It is Quebec's only nuclear plant and produces enough electricity to supply 270,000 homes a year.
Most of Hydro-Quebec's electricity needs are met by hydroelectric power production. Hydro-Quebec said refurbishing the generating station will begin with engineering and procurement this year, with construction to begin in 2011, with a return-to-service date of 2012.
The nuclear refurbishment in Quebec comes at a time of growth for Canada's nuclear industry as governments expand their power grids with nuclear energy, avoiding polluting coal-fired plants.
In New Brunswick, NB Power is refurbishing the Point Lepreau nuclear plant to add another 25 years of operating life. The project will cost the utility about $430 million.
In Ontario, the province is expanding its nuclear network, already the most extensive in Canada, with new reactors to be built at the Darlington nuclear generating station east of Toronto by 2018.
The province has asked three companies Atomic Energy of Canada Ltd., Areva NP of France, and Westinghouse, a U.S.-Japanese joint venture to submit bids to build the reactors by the end of the year.
In Alberta, the Bruce Power partnership which already operates a nuclear plant in southwestern Ontario is proposing to build a nuclear generating station in the Peace River region.
If the project is approved, it would be the first nuclear power station in Western Canada, a region of the country where hydroelectric, coal-fired and gas-fired stations produce most of the electricity.
Bruce Power is a partnership owned by TransCanada Corp., uranium miner Cameco Corp. and a unit of the Ontario Municipal Employees Retirement System, one of Canada's largest pension funds.