Work on the factory, to be based near Hohhot, is due to begin in mid-2007, with a plan to have it operational by the last quarter of 2008.
Planned capacity will be eight billion packages per year.
The move brings Tetra Pak's investment in China to more than €250m, and again shows how the world's largest packaging and processing firms are looking to supply the country's rapidly emerging food and drink sector.
Dennis Jönsson, Tetra Pak chief executive, said the investment underlined the group's commitment to the Chinese dairy and beverage industry, in particular.
The new plant will feature Tetra Pak's most advanced technologies and equipment to produce popular carton packages such as the Tetra Brik Aseptic and Tetra Fino Aseptic, the firm said.
Hudson Lee, Tetra Pak China managing director, added : "This factory will primarily serve our customers in the north, freeing up capacity in our southern factories for customers in adjacent regions.
With a larger production footprint, we will offer faster delivery and increased flexibility for customers all over China."
Tetra Pak estimated that China's dairy market would grow at around 15 per cent per year over the next five years.
Last year, after the firm said it would build a second laminator plant in Beijing, it said the market was currently growing by up to 26 per cent annually.
Production of raw milk has been growing at a faster rate than demand in China recently, but consumption is still expected to increase from an average 20kg per capita now to 30kg in 2015, according to Rabobank .
The market is also becoming more sophisticated with consumers moving from milk powder to UHT milk and Chinese consumers becoming more brand conscious to ensure quality and food safety, the bank said.
China's beverage sector, meanwhile, is considered one of the most dynamic of the overall food and beverage industry, with total production of almost 40 million metric tonnes in 2006, increasing by 18 per cent compared with 2005.
But while carbonated beverages account for the majority 23.8 per cent of this volume, this share is expected to decline in the face of juice and water, just as it has in mature markets in the west.
The strong growth in both beverage and dairy sectors has attracted interest from most of the major multinational players, PepsiCo, Coca-Cola and Danone.