The company, which holds a 60 per cent stake in the Diavik joint venture, said Thursday it will develop the A21 kimberlite pipe.
The expansion will include construction of a dike around the ore body which is located under a lake.
Rio Tinto said it will use the same design and technology used to build the mine's two other dikes.
The Diavik diamond mine is 300 kilometres northeast of Yellowknife.
Production from the expansion is expected to start in late 2018.
"Our decision to invest in the Diavik A21 project reflects our strong confidence in the diamond sector and in our ability to compete effectively in the industry," said Alan Davies, Rio Tinto's diamonds and minerals chief executive.
Dominion Diamond Corp. (TSX:DDC), which holds a 40 per cent stake in the Diavik joint venture, approved the expansion on Wednesday.