The €28-million contract covers an assembly line for Fuchs armoured personnel carriers and their parts, the magazine said, quoting the economy ministry.
The plant is to be built around 400 kilometres east of Algier, the report stated.
The contract dates back to a visit to Algeria by Chancellor Angela Merkel in 2008 and had already been largely approved by her previous administration, it added.
Details of the factory for armoured vehicles were first reported in June. Algeria was Germany's biggest arms market in 2013 with exports to the north African country worth more than €825 million.
Gabriel recently blocked a contract for Rheinmetall to provide a fully-equipped training camp to Russia because of the crisis in Ukraine.
SEE ALSO: Germany to sell Algeria arms factory
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