The company has confirmed that the model will be the third of its modern range of electric cars and will be released after the Model X SUV.
According to reports, Tesla had considered calling the car the Model E, but has now confirmed that it will be called the Model 3, or III.
The car is expected to be revealed in 2016, before it is launched in 2017.
Tesla currently sells the Model S executive saloon in the UK (pictured), with the Model X SUV set to follow. Production of the Model X starts later this year, with deliveries starting in 2015.
The Model S and the Model X both come with a choice of a 60kw or 85kw electric motor and have an official range of up to 312 miles. Both cars are capable of 0-62mph in less than 5.0 seconds.