Grosvenor Barracks, a former military base in Enniskillen, has been chosen to accommodate 350 new mixed tenure homes at a cost of £40 million.
Stormont social development minister Margaret Ritchie told Assembly members: "We will build nearly 350 mixed tenure homes that will solve the social housing crisis in Enniskillen for the next five years.
"As part of this development we will deliver the first eco-village in the north (of Ireland), introducing a new ethos in the design process, setting new standards of construction and bringing benefits to the environment and residents alike."
It is understood the houses will contain solar panelling and some may also draw energy from the ground.
Ms Ritchie also announced that from April 1 a new environmental code would be applied to all new social houses to make them more energy efficient and green during their construction and occupation.