Alphabet Inc.’s Google announced a major real-estate expansion in New York City that will make the company one of the city’s largest commercial tenants and add thousands of jobs in coming years.

In a blog post Monday, Google said it would lease a large office building at 550 Washington St. in Manhattan’s West Village neighborhood and make it the centerpiece of its new 1.7 million-square-foot Hudson Square Campus. Google plans to invest $1 billion in capital improvements to the campus, which will also include two nearby buildings...