Datsun was developed in 1930, becoming a popular and inexpensive model -- particularly in the United States -- but was phased out from 1981 as Nissan pushed its own name onto its cars.
The company said it would re-introduce an updated model to the market from 2014 for sale initially in Indonesia, India and Russia.
"Datsun is part of our history. It was synonymous with affordable and reliable cars," company chairman Carlos Ghosn said in the Indonesian capital Jakarta.
"With the return of Datsun, we want to add modernity to it, with a new level of quality, like a high-fuel economy."
Datsun is the company's third global brand alongside Nissan and Infiniti.
In a meeting with President Susilo Bambang Yudhoyono on Monday, the company said it will invest $400 million in its western Java plant to increase production capacity from 100,000 to 250,000 vehicles a year by 2014.
The move will mean Nissan, which formed an alliance with French carmaker Renault in 1999, makes more cars in the nation than its main rival Toyota.
Toyota recently announced a $340 million investment for the construction of a second plant in Indonesia to raise production from 110,000 units a year to 180,000 by 2013.
"Nissan will play a leading role. We'll be one of the most important carmakers in Indonesia," Ghosn said.
Annual car sales in Indonesia jumped around 16 per cent in 2011, reaching 890,400 units, and are expected to hit 940,000 this year, according to a Frost & Sullivan report.
Indonesia, Southeast Asia's largest economy, is seeking billions of dollars in foreign investment to help it achieve a target of seven per cent growth by 2014.
The archipelago aims to attract up to $465 billion in private investment by 2025.