General Fusion, a Canadian start-up that says it wants “to transform the global energy system”, will build the plant at Culham in Oxfordshire, which is already home to a fusion research programme run by the UK Atomic Energy Authority.
The development, said to cost about $400m (£232.5m), is subsidised by British taxpayers, though the government has declined to say how much it is putting in.
Unlike nuclear fission, which creates harmful radioactive waste which persists for thousands of years, it is hoped that nuclear fusion may will release vast amounts of carbon-free energy.
The new centre, 70 per cent the size of a commercial reactor, will not generate power but will demonstrate how it is done, and General Fusion says it will pave the way for a commercial pilot plant.
Construction is due to begin next year, with the plant in operation by 2025.
Nuclear fusion, which involves the binding together of atoms at extremely high temperatures, is the process that powers stars. Scientists hope it can become a widespread source of energy that avoids burning fossil fuels, thereby avoiding the release of damaging greenhouse gases.
General Fusion, which was set up in 2002, says it wants to make fusion power “a world-saving reality” and to create an “emotional connection” between the public and the emerging technology.
Until recently, technical challenges have prevented nuclear fusion being used to generate energy on a commercial scale.
But a large €20bn (£18bn) fusion reactor called Iter is already being built in France, backed by countries including the UK. It is not expected to reach full power before 2035.
Last month the UK Atomic Energy Authority successfully tested an exhaust system capable of withstanding the extreme heat generated by fusion power stations, which it described as “a world-first concept that could remove a barrier to fusion energy”.
Backed by Mr Bezos for at least a decade, General Fusion raised $100m in its last round of funding and is preparing to ask investors for more cash to boost its pilot project.
The company uses “magnetised target fusion” systems, which involve compressing plasma until its atoms fuse, generating massive amounts of heat.
It says the plant will show this technology can create energy cost-effectively on a large scale.
Science minister Amanda Solloway said: “Fusion energy has great potential as a source of limitless, low-carbon energy, and today’s announcement is a clear vote of confidence in the region and the UK’s status as a global science superpower.”