The development of a $400 million lithium processing plant in Kwinana, south of Perth, has been given the green light and is expected to create more than 600 jobs locally.

Chinese company Tianqi Lithium will build the plant, which will have the capacity to produce about 24,000 tonnes of lithium hydroxide a year.

State Development Minister Bill Marmion said the project was expected to create up to 500 jobs during the two-year construction phase and more than 115 jobs once the project was operational.

"Demand for lithium is increasing rapidly thanks to its growing use for renewable energy storage and electric car batteries," Mr Marmion said.

"While Western Australia has been mining and exporting lithium for more than 25 years, this project introduces value-adding secondary processing into the local supply chain.

"This is very positive news for growing the state's economy as we seek to take a greater role in processing our raw materials to produce higher value products."

Construction is expected to start next month.

City of Kwinana Mayor Carol Adams welcomed the employment boost.

"Currently adult unemployment in the Kwinana region sitting at 11.4 per cent — that's twice the state average," Ms Adams said.

"I don't think you can underestimate the importance of having job opportunities within the region and also they're will be spinoff opportunities within the industry."