The announcement is likely to be a major boost to Riyadh as the kingdom pushes to attract greater foreign investment.
Nestle will build a new factory, due to open in 2025 that will produce infant nutrition products and ready-to-drink coffee for the Saudi, Middle East and North African markets, the company said.
It already has seven mineral water factories in Saudi Arabia.
The investment will create 3,500 direct and indirect jobs, Nestle said.
It currently employs 5,000 people in Saudi Arabia.