The confirmation comes after the company had hinted for some time that it was reviewing various options to build its second overseas factory in an East European country.
"A deal has been reached for the building of the Czech plant, but it is too early to go into details," said a corporate source who declined to be identified.
The insider, however, said Czech Prime Minister Bohuslav Sobotka's comments on the factory were accurate.
Earlier in the day, Czech media reported that Sobotka approved the plan that he said highlighted interest shown by overseas companies towards the country and Prague's attractiveness as an investment destination.
Local media said the investment could involve the inflow of over 2 trillion won (USD 1.95 billion) and create 2,300 jobs in the long run. The plant is to be built near the northwestern town of Zatec.
Once the factory starts churning out tires, it will be able to supply them to car production plants run by South Korea's Hyundai Motor Co. and Kia Motors Corp, which are nearby, as well as to Skoda Auto, a wholly owned subsidiary of Germany's Volkswagen Group.
The new Nexen plant will be the company's second overseas operation after the one set up in Qingdao, China.
The company said it aims to become one of the top 10 tiremakers in the world by 2018.