The move will increase the annual production of backhoe loaders from 11,000 to 20,000.
Human resources manager Simon Collins said: “The investment will allow us to have the most up-to-date assembly line that's available.”
He said it was likely additional staff would be needed, and that the scheme will involve internal building work, but it will not mean any major physical expansion of plant.
Caterpillar announced £50million (€58.6million) of investment spread between its Desford base and a site in Stockton-on-Tees, in the north-east of England, but bosses said the majority of cash will be spent at the Leicestershire factory.
UK managing director Robert Droogleever said the move was a vote of confidence in the county and regional economy and UK manufacturing.
He said: “Our workforce has demonstrated that it has the capability to design and assemble world-class products in Desford and Stockton.
“With more than 90% of our products being exported, it sends a strong signal about the ability of UK-based manufacturers to be globally competitive.”
The news marks a sharp turnaround from the darkest days of the recession, when a lack of orders saw 750 shopfloor staff at Desford move to a three-day week and production halted for four weeks to save costs.
