The Sheraton da Bahia Hotel will be in Salvador, and reopen in the first quarter of 2013 following an extensive renovation.
The 284-room historic Hotel da Bahia will have a 2,500sqm meetings and event facility with capacity for more than 400 people.
It will be the sixth Sheraton in Brazil, while plans are also under way to open the Sheraton Reserva do Paiva Hotel and Conference Center in Recife in 2014.
The hotel will have two restaurants, a spa with a salon and sauna, swimming pool, and business centre.
"This is a historic time for the Sheraton brand. Starwood has invested billions of dollars in renovating iconic properties and bringing the brand to the most important places in the world," said Hoyt Harper, global brand leader for Sheraton Hotels.
"Brazil is now a powerhouse economy whose prominence around the world will be permanently established with the upcoming World Cup and Olympic Games, and Sheraton is thrilled to expand its presence there during these exciting times."