The announcement comes as Sears Canada (TSX:SCC) prepares to exit the high-profile mall next month.
The new three-storey Nordstrom store will cover about 213,000 square feet, said Cadillac Fairview, manager of the Toronto Eaton Centre.
That compares to the five storeys of the current Sears store.
About 140,000 square feet will be leased to other store tenants once the space is renovated, said Janine Ramparas, a spokeswoman for the mall operator.
Construction on the new Nordstrom (NYSE:JWN) location in Toronto is set to begin in March.
The Seattle-based retailer of high-end fashion is planning a steady push into Canada starting this fall with a store at the Chinook Centre mall in Calgary.
Cadillac Fairview owns Chinook, as well as malls in Ottawa and Vancouver that will open Nordstrom stores next year.
"Our properties were the first to welcome Nordstrom to Canada, and we're thrilled to continue our partnership," said John Sullivan, Cadillac Fairview's president and chief executive.
"We believe it takes foresight and innovation to bring popular retail brands like Nordstrom to our centres, which in turn attracts enthusiastic shoppers."
The Toronto Eaton Centre is one of the city's biggest tourist attractions, as well as a major shopping mall for area residents.
Sears has been occupying a space that was originally home to the flagship Eaton store, before the family-controlled national Canadian chain went bankrupt in 1999.
When Sears moved in, it was already a scaled back version of the grandiose Eaton's department store that covered even more floors. Over the years, Sears has closed off some floors to make way for other retailers and corporate offices.
Sears Canada — a subsidiary of U.S.-based Sears Holdings Corp. (Nasdaq:SHLD) — has been selling off some of its leases as it tries to manage its costs and respond to changing consumer shopping habits and increased competition.
The company said it intends to maintain its Sears Canada headquarters on the top four floors of the building where it opened nearly 14 years ago.
It has long been speculated that Nordstrom would be interested in the Toronto Eaton Centre location, one of several that Sears has agreed to vacate in recent years in return for large payments from its landlords.
Last summer, Sears announced would receive $191 million cash for agreeing to leave the Yorkdale Shopping Centre in Toronto and Square One Shopping Centre in Mississauga, Ont., by March 2014. It could also receive an additional $54 million if the landlord exercises an option on the Sears store at the Scarborough Town Centre.