"[It] will convert Venezuela into a nation truly invulnerable to any external threat, invulnerable to any plan of aggression."
He said oil-rich Venezuela would also open factories to product rifles, centres to train jet fighter pilots and facilities to upgrade the Venezuelan airforce.
Chavez has often spoken of his aim to upgrade the country's defence systems but Friday's speech was the first time he has done so with any specific detail.
Chavez said Venezuela's arms build-up did not pose a threat to regional stability as Washington has suggested, but said that the country was simply modernising its military after years of neglect.
"They are necessary investments. We're not going to attack anybody," he said.
Chavez announced spending of more than $561 million for factories to build automatic AK-103 assault rifles, munitions, and detonators.
Chavez has previously expressed interest in purchasing weapons from Iran [AP]
In addition, he said Venezuela would open one facility to train pilots to fly Russian M-17, M-26 and M-35 helicopters, and another to overhaul F-5 fighter jets.
Venezuela was also considering building a plant to maintain Russian helicopters, he said.
Venezuela last year signed an agreement with Russia to buy 24 Sukhoi fighter jets and 53 helicopters. That followed earlier deals to acquire 100,000 AK-103 Kalashnikov rifles and other helicopters.
Those military purchases are estimated to have cost around $2.7 billion.
He has also previously said that he was considering purchasing arms from Belarus and Iran.