Derry City and Strabane District Council (DCSDC) said the cemetery at Mullenan Road would provide burial space for at least 20 years.
There has been concern in the north west about a lack of burial space.
Last year it was revealed there are fewer than 400 plots available at Derry’s City Cemetery.
The decision to acquire the new land was made “following over 10 years of extensive work by council teams to define, seek, investigate and assess a number of sites on the west bank of the city”, a DCSDC spokesman said.
The Mullenan Road acquisition also allows for “potential further expansion on to adjoining lands”, he added.
“Following extensive technical reports and assessments it was agreed that the lands at Mullenan Road are the most suitable lands for this major development project,” the spokesman said.
The council will now “engage with all relevant stakeholders in taking this strategic project forward”, he added.
Sinn Féin Foyle MLA Pádraig Delargy it is vital “people’s views are heard and people are kept informed”.
Plans to increase the short-term capacity at the City Cemetery will go before council’s planning committee later this month.