The Prime Minister gave details of the scheme as he marked Holocaust Memorial Day at question time in the Commons.
It is to be put up in Victoria Tower Gardens, alongside the Thames next to the Palace of Westminster, and would “show the importance Britain places on preserving the memory of the Holocaust”, he told MPs.
Downing Street said an international design competition will be launched in the coming weeks and the memorial built by the end of 2017.
“It will stand beside Parliament as a permanent statement of our values as a nation and will be something for our children to visit for generations to come,” Mr Cameron said.
“It is right that our whole country should stand together to remember the darkest hour of humanity.”
The national memorial was one of the recommendations of a report published on last year’s 70th anniversary of the liberation of the concentration camp at Auschwitz-Birkenau.
Mr Cameron has promised £50 million towards the monument, as well as the establishment beside it of a “world-class” education and learning centre, details of which are still to be announced.
Chairman of the UK Holocaust Memorial Foundation, Sir Peter Bazalgette, said: “The task of the Holocaust Memorial Foundation was to find a site that would allow a striking, prominent and iconic memorial to be built.
“There is nowhere better to achieve this than beside Parliament.
“I stood there with a Holocaust survivor earlier this week and I will never forget his reaction when I told him of our plans. It demonstrated how we are doing the right thing for Britain’s Holocaust survivors in preserving the memory of humanity’s darkest hour.
“But just as importantly, we’re doing the right thing for our country by creating a permanent reminder of the need to fight hatred and prejudice in all its forms.”
Chief Rabbi Ephraim Mirvis said the memorial would be “warmly received” by the Jewish community.
“Indeed, it sends the strongest possible message on behalf of the whole country, that the lessons of the Holocaust will forever form a part of our national consciousness and that the legacy of survivors will be secured for posterity.”
Holocaust Memorial Day marks the anniversary of the liberation of the Auschwitz concentration camp in 1945.
Political leaders took to Twitter using the hashtag #DontStandBy.
On Holocaust Memorial Day, we remember the victims of genocide and resolve to stand against prejudice & intolerance. #DontStandBy @HMD_UK
— Nicola Sturgeon (@NicolaSturgeon) January 27, 2016
The tragedy and brutality and loss must never be repeated #HolocaustMemorialDay pic.twitter.com/dPt7fSdLik
— Jeremy Corbyn (@jeremycorbyn) January 27, 2016
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