The announcement comes after outgoing Cisco CEO John Chambers told Techworld that Cisco would be "coming to" the UK in July.
Speaking at, Cisco Live, the company's annual conference, Chambers said Cisco would be investing in countries as they digitise, providing that the governments of those countries were willing to form partnerships.
Cisco signed a deal with France in February. The international investment has tax benefits for Cisco. By forming partnerships overseas, Cisco is also able to find a way to spend its money without paying US taxes. "Remember we have $52 billion captured and locked outside the US" said Chambers.
Cisco manufactures many of the networking systems and components that support the internet of things, of the "internet of everything" as Cisco refers to it.
The internet of things is forecast to be a huge market, with analysts predicting there will be 50 billion internet-connected gadgets by 2020. Cisco believes the market is a $19 trillion (£12 trillion) opportunity and it has already invested in UK research.
Cisco said it will spend $150 million (£98 million) of the $1 billion on UK startups focusing on financial technologies, security, retail, healthcare, and smart city development.
"When we invested in France we pledged a minimum of $100 million in startup investments and you're going to see that occur as countries digitalise around the world," said Chambers at Cisco Live.
The San Jose-headquartered company has also pledged to support the UK government's northern powerhouse initiative, through the addition of new centres of expertise, funded university collaborations, skills investments and expansion of Cisco's apprenticeship programmes.
The UK is Cisco's second largest country market, and the company has up to 7,000 employees here. Cisco intends to grow its UK footprint by with the addition of a new Central London office before the end of 2015, and the creation of over 200 new jobs.
Prime Minister David Cameron said: "This massive investment from Cisco is great news for the UK's growing digital economy and is a clear vote of confidence in our long term economic plan. It will create jobs and growth across the country, providing security for hard working people."
Chambers added: "We believe the UK is well on its way to becoming one of the top digitised countries in the world, and we're proud to once again activate new programmes and continue our deep commitment to partnering with the UK government. Since 2011 we have delivered over and above on every objective we set with government in our prior commitments - encouraging technology, innovation and entrepreneurship."
The company is one of several US firms looking to cash in on the UK's thriving technology industry.
London & Partners, the Mayor of London's promotional agency, published data earlier this year which showed that technology companies in London alone obtained $1.4 billion in funding last year, with $795.2 million coming from US-based investors.