The facility will process up to 30,000 tonnes per annum of the citys organic waste, including food, green and cardboard waste, over a 20 year period.
New Earth Solutions will develop a bespoke facility for Bristol City Council that will provide a local recycling solution for its organic waste.
Bristol City Council councillor Mark Bradshaw said: Bristol has made great progress in achieving much higher levels of recycling and by working in partnership with New Earth Solutions we can continue to see this improvement, while removing the need to send our organic waste by road to Dorset.
"The new dedicated facility will be bespoke and designed to an exact specification based on a tried and tested methodology. It is ultimately ideal for the specific requirements of Bristol based residents.
The plant is set to take nine months to build and will be fully operational by 2010.