The announcement came during a meeting between Ukrainian President Petro Poroshenko and the company's CEO in south-east Europe in the capital Kiev.
“It's the right moment for Ikea to be here, when we look at the business climate and the opportunities,” Stefan Vanoverbeke told the Ukrainian leader.
Poroshenko called the agreement “a good signal for global brands” which he said meant that his country had made progress in the fight against corruption.
The opening of an Ikea store in Kiev, said Poroshenko, was the culmination of 13 years of negotiations.
“Unfortunately, it could have happened at least ten years ago,” he said. “But the investment climate did not allow Ikea to make the right decision at the time.”
In 2009, the world's biggest furniture retailer said it would open an outlet in Ukraine and went on to buy a plot of land near the south-west port city of Odessa, but it abandoned those plans a year later, saying the market was not strong enough.
Ukrainian and Swedish media reports suggested the real reason it pulled out was that Ukrainian officials demanded kickbacks.
The company itself hinted at the problem, with a senior executive saying in 2010 that “Ikea does not have money” to pay bribes.
Ukraine, a country of more than 40 million people, is battling a Russian-backed separatist insurgency in the east. The conflict – which broke out after Russia annexed Crimea from Ukraine in 2014 – has claimed more than 10,000 lives.
In 2015, Aivaras Abromavicius, Ukraine's economy minister at the time, visited Stockholm and pleaded with Ikea to set up shop in his country.
He argued that “it would be an important symbol” of Kiev's anti-corruption fight.
Ukraine ranked 130 out of 180 countries assessed by Transparency International's corruption perception index in 2017.
Ikea has stores in more than 50 countries, including post-Soviet Latvia, Lithuania and Russia.
In August this year, Swedish fashion retail group H&M opened its first store in Ukraine.