The news comes after concerns about the future of the car giant's plant in the North East after the UK leaves the European Union.
It is the first major UK automotive decision since the Brexit vote in June.
Nissan boss Carlos Ghosn visited Downing Street earlier this month for crunch talks with Prime Minister Theresa May.
He said: "I am pleased to announce that Nissan will continue to invest in Sunderland.
"Our employees there continue to make the plant a globally competitive powerhouse, producing high-quality, high-value products every day."
The Sunderland plant, which has been active since 1986, employs almost 7,000 people and produces around 2,000 cars a day.
Nissan is part-owned by French manufacturer Renault, raising concerns that production could be moved to France to avoid any tariffs which could be introduced on exports to the EU if the UK leaves the single market in a so-called "hard Brexit".
Mr Ghosn added: "The support and assurances of the UK Government enabled us to decide that the next-generation Qashqai and X-Trail will be produced at Sunderland.
"I welcome British Prime Minister Theresa May's commitment to the automotive industry in Britain and to the development of an overall industrial strategy."
Business Secretary Greg Clark said: "This is fantastic news for the UK economy, the people of the North East as well as the automotive industry and its supply chain.
"The UK automotive sector has had a remarkable year - exporting over one million cars around the world and today's announcement underlines the confidence in the sector. "
"The fact Nissan have not only made a long-term commitment to build the next generation Qashqai and Xtrail at Sunderland, but decided to upgrade their factory to a super-plant, manufacturing over 600,000 cars a year, is proof of the strength of the sector."
Andrew Hodgson, chair of the North East Local Enterprise Partnership, said: "Nissan’s decision to produce the next Qashqai at its Sunderland plant is a welcome one which underlines the strength of the automotive industry here in the North East.
"The advanced manufacturing and automotive sector is a key pillar of the strategic economic plan and is one we will continue to invest in. Nissan’s workforce and the wider supply chain are world class and this success is absolutely merited."