The company said it would build the assembly plant at an industrial park near the southern city of Chennai, investing $280 million over five years.
Yamaha said construction on the plant would start this year with production scheduled to begin in 2014, adding that the facility will be able to produce about 1.8 million motorcycles a year from 2018.
The firm has a motorcycle parts plant and another assembly plant in northern India with annual production at the assembly site to be increased to one million units by 2018, up from 600,000 units, it said.
"We want to expand our business in India with this new plant" Yamaha said, predicting that the country's motorcycle sales could rise to 25 million units annually by 2018, from 13 million last year.
Japanese companies have been aggressively seeking investment opportunities abroad in recent years, taking advantage of the yen's strength to diversify their operations and make them globally competitive.
Yamaha also reported that its net profit for the January-March quarter dropped to 11.52 billion yen from 13.45 billion yen in the same three months a year earlier.
Sales were off 0.8 per cent to 315.91 billion yen, it said.
For the calendar year, Yamaha kept its forecast unchanged, predicting a net profit of 17 billion yen on sales of 1.4 trillion yen.