The factory, which will cost $100million and employ 400 people, will be set up in Fort Smith. It will build MHI's controversial 2.4MW turbine currently at the centre of a legal wrangle between the Japanese company and GE.
There had been a chance MHI was going to axe the project. In mid-February, it said it was delaying a decision on the factory until it saw evidence that demand would pick up in the second half of the year.
Manufacturing at the plant will begin next year and reach full production in 2012. In addition to MHI's investment the factory has been backed with incentives from the state including a $3.75million grant and 15-year state income tax abatement.
MHI used to have around 30% of the US market, however this has slipped to just below 10%.
MHI's Arkansas announcement follows its decision in February to invest £100million building an offshore wind turbine research facility in north-east England.