"Today's announcement is about solidifying jobs and becoming more competitive than ever before right here in Canada," Joe Hinrichs, Ford's executive vice-president for the Americas, told a news conference at the plant.
The funding will allow the plant to produce several new Ford models that will be sold in North America and around the world, Hinrichs said.
The Oakville plant currently makes the Ford Edge, Ford Flex, Lincoln MKX and Lincoln MKT.
The federal government will pitch in $71.9 million and Ontario will contribute $70.9 million to upgrade the plant.
Ottawa's contribution is part of the $250-million Automotive Innovation Fund that the government renewed earlier this year.
The investment will "secure" 2,800 jobs at the plant, the company said, but both the company and the union representing workers stressed the impact on employment will go beyond that because of the many jobs that will be indirectly created as a result of the plant's operations.
"Every job in this plant supports another six, seven jobs," said Jerry Dias, president of Unifor, the newly formed union created with the merger of the Canadian Auto Workers and the Communications, Energy and Paperworkers.
Dias said the investment solidifies the future of the plant for "well over a decade" and is the result of hard-fought labour negotiations with the company.
"We won this investment; we earned this investment we absolutely fought for this investment," he said at the Oakville news conference Thursday morning.
Dias said the investment is good news for workers, but also will be a welcome boost to the economy and the automotive sector.
"It's not just about the new jobs; it's about the global platform, the increase in content. The auto industry in Canada is finally on the move," Dias said.
Ford said it will increase its spending on Canadian-made auto parts by $200 million to a total of $4 million a year.
Upgrading the plant technology so it can be more flexible and efficient, and more quickly respond to consumer demand will "help keep Oakville assembly on the cutting edge of the developments of the global marketplace," said Dianne Craig, president and CEO of Ford of Canada.
Ontario Premier Kathleen Wynne, who also spoke at the news conference, agreed that modernizing production methods at plants such as the one in Oakville is what will keep manufacturing alive in the province.
"This kind of investment plays to Ontario's strengths, and investing in advanced manufacturing is exactly what we need to do to keep our economy growing and cooking," she said.