The first batch of smartphones produced from Foxconn's Sri City facility in Andhra Pradesh will be commercially available by end of this year.
"Producing smartphones in India is one of the most important decisions that we have made so far at OnePlus, and we are thankful to the Government of Andhra Pradesh and Foxconn for helping us make this happen," OnePlus founder and CEO Pete Lau said in a statement.
"India being one of our biggest markets worldwide, we are committed to a long-term sustainable growth path. This move will strengthen our presence and help us step up momentum in India," he added.
Welcoming OnePlus to the state, Andhra Pradesh Chief Minister Nara Chandrababu Naidu said the aim is to "catapult Andhra Pradesh to become one of the hottest destinations for local manufacturing in India".
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Though the company did not disclose the investments made, OnePlus India General Manager Vikas Agarwal said the facility at Foxconn's Rising Stars factory will have a cumulative peak capacity of producing up to 5 lakh units per month.
The move will help the Chinese firm bolster its presence in the burgeoning Indian handset market, which is among the fastest growing globally.
India is poised to overtake the US as the second-largest market in the next few years. Shipments to India grew 44 per cent to 26.5 million units in April-June, as per research firm IDC.
Over the past few months, global smartphone makers like Oppo and HTC have stated that they are considering manufacturing in India, under the government's 'Make in India' initiative.
Last month, Lenovo and Motorola had announced that they will start manufacturing smartphones at their factory in Sriperambudur, Chennai.