Intel, would start expanding the plant this year and work would be completed in 2020, the minister said in a statement.
A spokesman for Intel in Israel declined to comment.
The U.S. semiconductor firm has said it planned to upgrade the facility to 10-nanometer technology from 22-nanometer, making chips that are smaller and faster.
Intel received a state grant worth 5 percent of the $6 billion it invested in upgrading the plant in 2014, when it was also granted a reduced corporate tax rate of 5 percent for 10 years.
