Warner Bros has announced it has bought Leavesden Studios, home to the Harry Potter series.
The expansion programme, due for completion in 2012, will mean the studios in Watford will represent around a third of Britain's total film stage space.
It is the first time a Hollywood studio has purchased its own permanent production facility in the UK.
Warner said the expansion would create around 1,500 jobs at the studio and a further 300 for building and specialist contractors.
The 170-acre site is currently being used to film the second Sherlock Holmes film, directed by Guy Ritchie. After the expansion the Leavesden studio will be capable of hosting two major films as well as advertising and television shoots.
The announcement came as work begins to build two new sound stages to house sets, costumes and props from the Harry Potter films. Fans of the series will be able to book tours of the new stages, which will be separate from the working studio.