The $A16 billion experimental reactor will be hosted in Cadarache, in France’s south.
The International Thermonuclear Experimental Reactor (ITER) project is funded by China, the EU, Japan, Russia, South Korea and the United States, however there was division over where to put the test reactor.
Ministers from partner countries signed an agreement at a closed-door meeting in Moscow.
“After long discussions and a great deal of joint work, the participants chose the site of Cadarache in France,” Russia’s atomic energy chief Alexander Rumyantsev told reporters.
“Today we are making history in terms of international scientific cooperation,” the EU’s Science and Research Commissioner Janez Potocnik said in a statement.
Estimates cited by Dow Jones NewsWires indicate that the decision could lead to the creation of up to 100,000 new jobs for France, as well as billions of dollars in research funding, construction and engineering contracts.
The reactor seeks to mimic the way the sun produces energy, potentially leading to a virtually constant source of low-cost energy, using seawater as fuel.
Nuclear fusion produces no greenhouse gas emissions and only low levels of radioactive waste.
If successful, scientists hope to replace energy produced by polluting and finite fossil fuels.
Japan had put forward a site at Rokkasho, in the country’s north, however withdrew the bid at the last minute.
Site proposals for Canada and Spain had already been withdrawn, clearing the way for Cadarache.
ITER began in 1985, however decades of research have so far failed to produce a commercially viable fusion reactor.
ITER seeks to generate energy by combining atoms, unlike fission reactors used in existing nuclear power stations which release energy by splitting atoms apart.
France has 58 nuclear reactors, second only to the US.