The PSA group will produce a Citroen Peugeot SUV based on the Mitsubishi ASX.
The announcement comes after an agreement between the two companies which confirms rumours of recent months.
The move will allow Citroen and Peugeot to offer a mid-size SUV in addition to the current C-Crossover and 4007 models, which are based on the Mitsubishi Outlander.
Peugeot could call its model the 2008.
The new PSA SUV will be presented in Europe in 2012 and sales of about 50,000 models a year are expected.
According to the group, the compact SUV market could grow about 60 percent by 2015.
Plans are that the model will have either front wheel or all-wheel drive and will use the 1.
6-litre HDI engine.
In a two-wheel drive version, fuel consumption would be about 4.
7 l/100 km with CO2 emissions of 123 g/km.