Under the terms of the agreement with Ottawa and Ontario, Honda will build batteries, process the cathode materials needed for the batteries and also assemble electric vehicles.
Details of the government support were not available.
The deal is worth billions of dollars, said the source, who requested anonymity given the sensitivity of the project. The finalisation of the agreement, due to be announced on Thursday, was initially reported by the Globe and Mail newspaper.
Canada has wooed companies involved in all parts of the EV supply chain to bolster its manufacturing heartland in Ontario as the world seeks to cut carbon emissions.
Without explaining what was included in the numbers, Ontario Premier Doug Ford earlier told reporters on Monday the deal was the largest in Canadian history and would be worth double the C$7 billion that a planned Volkswagen EV electric vehicle plant in Ontario is set to cost.
Prime Minister Justin Trudeau last year said that Canada was looking for more "targeted" investments after the government gave hefty subsidies to Volkswagen and Stellantis- LG Energy Solution for their planned battery gigafactories.
In a federal budget last week, the government introduced a new investment tax credit giving companies a 10% rebate on the costs of constructing new buildings used in key segments of the electric vehicle supply chain.
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