The Swedish Defence Materiel Administration (FMV) has placed an order with Saab for the construction of the next-generation A26 submarines.
The $70m order also includes mid-life updates to the Royal Swedish Navy's two Gotland-class submarines, including the completion of systems design and detail construction.
The latest agreement brings the Swedish Government's objective of rebuilding an indigenous submarine design and production capacity a step closer.
Work under the contract, which will be carried within Saab's Security and Defence Solutions business area, includes the completion of system design on the A26, in addition to detail construction in 2014-2015.
Both parties have also signed a letter of intent (LOI) regarding the work that Saab could offer the Swedish Government for the development, design and production of submarines and other underwater systems.
The LOI also includes potential orders worth $1.6bn for future work, provided required decisions are made.
Saab Security and Defence Solutions business-area head Gunilla Fransson said: "With today's orders and the letter of intent, we take the next step towards becoming a full-service provider of submarines for Sweden.
"It strengthens our offer and our unique competence within systems integration."
The selection of Saab comes after Sweden, which is developing new, stealthier submarines known as A26, scrapped a deal with ThyssenKrupp for the construction of new models and upgrades to some of its existing underwater fleet.
Image: The Swedish Navy's Type (A 19) Stirling engine-powered attack submarine HMS Gotland. Photo: courtesy of the US Navy, photo by Photographer's Mate 3rd Class Jo A. Wilbourn Sims.