The loan guarantee for Solyndra Inc. is the first issued by the U.S. Department of Energy since the 1980s and will be part of the $787 billion stimulus package.
The guarantee means the government has to repay the loan if the company cannot.
The solar panels built at the plant will provide enough energy to power about 24,000 homes a year. Officials said hundreds of jobs will be created as the solar panels are installed on rooftops around the country.
"This funding is great news for Fremont and California because the project will create thousands of jobs, stimulate our economy and move us closer to our clean energy goals," Schwarzenegger said in a statement to The Associated Press.
The news is welcome for the city of 215,000, which sits on the eastern edge of San Francisco Bay near Silicon Valley.
Fremont was stung recently with the announcement by Toyota Motor Corp. that it was shutting a plant it ran with General Motors Corp. for 25 years. Under the decision, Toyota will stop production at the New United Motor Manufacturing Inc. plant in March 2010, moving production to its other plants in the U.S., Canada and Japan.
The plant employs about 4,600 workers.
The first phase of the Solyndra facility could lead to the production of as many new solar panels as the U.S. produced in all of 2005. Those panels can generate as much electricity as three coal-fired power plants, the Department of Energy official said.