The automaker said that the move will create or save 400 jobs on the flexible assembly line in Oshawa - the site of the company's Canadian headquarters and main car-making operations.
The Oshawa assembly plant has had major changes in the last year, with new vehicle models and expanded production that has added two new shifts and 1,300 jobs.
The Oshawa plant builds many GM models - from the Impala and Camaro to the Chevrolet Equinox and Buick Regal - and employs more than 4,500 people.
"Adding the Cadillac XTS affirms GM's commitment to a strong manufacturing base in Canada, ensuring Oshawa will have a critical role in the ongoing transformation of Cadillac," GM Canada president and managing director Kevin Williams said in a release.
The Cadillac XTS is being designed to compete against other luxury car brands. Production is planned to start in the first half of 2012.
The GM announcement "delighted" Canadian Auto Workers president Ken Lewenza, although he was less certain it would add jobs at the plant east of Toronto in the short term.
"I would certainly like to raise the expectation that it will create jobs, but it will really depend on the market," Lewenza said. "The reality is the investment will obviously provide the necessary capital to make the Oshawa facility flexible for the new product."
But in terms of the overall job-creation mechanism, he said that when a new vehicle is introduced these days "more days than not it's to replace another and your objective is to increase the (sales) volume."
GM Corp. and its Canadian subsidiary were bailed out by the U.S., Canadian and Ontario governments two years ago. The auto giant restructured its operations, closed plants and introduced new models to compete more effectively and reverse its mounting losses.
In Canada, the company shut down a truck plant in Oshawa and a transmission plant in Windsor, Ont., cutting its workforce. GM Canada currently employs more than 10,000 people across the country.