Automakers around the world are exploring plans for mass electric car production as the industry seeks to haul itself out a devastating downturn.
The Nissan news comes less than a week after Toyota said it would produce its first European-built hybrid car in Britain from 2010. A hybrid car is part-powered by electricity and is more fuel efficient than traditional vehicles.
Nissan is the biggest car manufacturer in the UK by volume, while Toyota is the fourth largest.
Nissan will invest more than 200 million pounds (US$328.6 million) in the plant near Sunderland, north east England.
"The two governments (UK and Portugal) have offered to extend financial assistance and other support to ensure that Nissan locates the proposed plants within their respective countries," Nissan said in a statement.
Nissan will also build a similar plant in Portugal as part of its plan to make and sell environmentally friendly electric cars. The location for the 250 million euro (US$354 million) plant, which should create 200 jobs, is yet to be chosen.
Each plant would produce 60,000 batteries a year.
Nissan's investment in Britain will come over five years, and will be supported by grants and loans from the UK taxpayer.
A Nissan spokeswoman said the details of grants had yet to be finalized, but added that the firm was also in talks with Britain over where to locate the production of electric cars.
An announcement is expected later this year.
UK Prime Minister Gordon Brown said the project would create 350 new jobs and safeguard hundreds more in the supply chain.
"Nissan's investment in a new battery plant... here in Sunderland is great news for the local economy," Brown said in a separate statement, although Nissan axed around 1,200 jobs in the area in January.
Portuguese Prime Minister Jose Socrates said during a signing ceremony in Lisbon that Nissan's decision to build the plant in Portugal "will lead to other investments in electric car projects in Portugal by other car manufacturers."
He said the government plans to boost electric car sales by offering an incentive of up to 6,500 euros to buyers, making it compulsory for new buildings to have charging points and replacing 20 percent of cars in local government fleets with electric ones by 2011.
Last year the Portuguese government, Nissan and its French partner Renault signed a deal to build 1,300 charging stations for electric cars by the end of 2011.
Nissan Europe Vice President Eric Nicolas said in Lisbon the UK and Portugal plants will export batteries to Nissan factories in other European countries and possibly also to other electric car manufacturers.
He said that if the electric car business goes well Nissan may expand the two plants or build a new one in Europe.
Nissan plans to have battery production factories in the United States, Europe and Asia.