BAE Systems blamed the closure plan for the former Vickers plant in Scotswood on fewer Ministry of Defence orders.
Now neighbouring defence and construction giant Reece Group has signed a deal with BAE to take on the factory for an undisclosed sum.
Reece plans to transfer work from existing sites into Scotswood.
Reece already employs about 500 people and hopes to expand the workforce at its new premises over time.
The Group includes Pearson Engineering, which designs and manufactures a range of military equipment for customers, including BAE Systems. It also produces equipment for oil and gas fields.
Chairman John Reece said: "This landmark site will be fully used as a manufacturing facility. We have also acquired plant and machinery no longer required by BAE Systems which will be used to support our activities in the oil and gas, and the subsea markets.
"We believe that engineering and manufacturing still has a valid and prosperous future in the North East.
"We place great emphasis on research and development and our investment in Scotswood will include the establishment of the Reece Innovation Centre, whose focus will be to design the group's next generation of innovative engineering products."

The man was hit by a vehicle also involved in the road repairs on Calderwood Road at about 16:30 on Saturday.
Police said he had died at the scene. No-one else was injured.
Firefighters and an air ambulance was sent to the scene. The Health and Safety Executive and South Lanarkshire Roads Department have been informed.
A Police Scotland spokesman added: "A full investigation into the circumstances of the incident is now under way.
"A report will be sent to the procurator fiscal."

The message, "Curry my yougrt (sic), oil my AK-47", was spray-painted on a wall outside DUP councillor George Duddy's house.
Part of the graffiti refers to comments made in the Northern Ireland Assembly when DUP MP Gregory Campbell said: "Curry my yoghurt can coca coalyer."
Mr Duddy said: "This is a personal attack on me and my family."
"There have been almost 30 incidents like this in the Coleraine area in the past year," he told BBC Radio Foyle.
"They come like thieves in the night and do what they do. They aren't man enough to come and make comments to my face."
He added: "There is only so much security around your home you can take. I will not be moving from my home.
"We have met with the PSNI recently but they haven't been making progress in catching anyone due to lack of evidence.
"People should come forward and report what they know.
"I have made it quite clear before that if people have an issue with me they should come and speak to me."
Last month, Mr Campbell, who is MP for East Londonderry, began an address to the assembly with: "Curry my yoghurt can coca coalyer" in imitation of the Irish sentence "go raibh maith agat, Ceann Comhairle" which translates as "thank you, Speaker".
Northern Ireland First Minister and DUP leader Peter Robinson has condemned the attack.
"The repeated attacks on Councillor Duddy's house represent a campaign of hatred and intimidation against a public representative," he added.
SDLP MLA John Dallat said on Monday: "Councillor Duddy should be allowed to represent in the area without these attacks.
"The people doing this need caught."
A former tank factory in Newcastle, which closed last year with the loss of 300 jobs, has been bought by a rival engineering firm.
[NEXT_CONCEPT]
A worker has been killed after being hit by a truck during resurfacing work in East Kilbride.
[NEXT_CONCEPT]
The police have said graffiti sprayed on the home of the mayor of Coleraine is being treated as a hate crime.