The announcement could safeguard thousands of jobs at BAE's sites at Warton and Samlesbury in Lancashire
Defence secretary Gavin Williamson joined Prime Minister Theresa May at the Farnborough air show.
After the announcement - details of which are still emerging - he tweeted: "Today it’s my pleasure to announce Britain’s next generation and world beating fighter jet Tempest at @FIAFarnborough as we launch our Combat Air Strategy.
"A Â£2bn investment in an industry that supports 18,000 direct jobs, 100,000 in supply chain & worth over Â£6bn to the UK."
Under its Combat Air Strategy, the aim is to deliver the next generation of combat air capability by 2035.
BAE Systems is working alongside the UK Government, the Ministry of Defence, the Royal Air Force and industry partners MBDA, Rolls-Royce and Leonardo to develop technologies to support the UK’s world-leading combat air capability.