The deal for 64 revamped, fuel-efficient A320neo jets and 36 current-generation A320s comes on top of 375 similar planes already ordered by Asia's largest low-cost carrier.
"We have just bought 100 planes which makes a total of 475. To meet the amazing demand in Asia," AirAsia owner Tony Fernandes wrote on Twitter.
The deal is worth $9.4 billion at list prices but in practice aircraft are sold at significant discounts.
Britain, which co-operates in building Airbus planes together with France, Germany and Spain, said the deal would safeguard 9,000 British jobs including 1,500 at Airbus itself.
"This is excellent news and a tremendous boost for the workforce and for UK manufacturing," British Prime Minister David Cameron's office said in a statement.
Cameron, who eyes manufacturing as crucial to a rebalancing the British economy away from sectors like financial services, was at the Airbus wings factory in Wales when the announcement was made.
Together, Cameron and Fernandes toured the Broughton plant, which employs over 5,000 people out of 60,000 employed by Airbus globally.
The order had already been included in the Airbus books without the name of the buyer being identified, meaning Thursday's event was mainly a ceremonial one to promote the airline and the impact of aerospace on the British economy.
Its announcement comes a day after data showed that the number of people in work in Britain hit a record high in November, offering some relief to a government struggling with unpopular austerity measures and a sluggish economy.
BOMBARDIER JET CONSIDERED
Economic growth, urbanisation and rising disposable incomes are spurring rapid passenger growth among Asian low-cost carriers, helping to shield Airbus and its rival Boeing from the malaise gripping developed economies.
Despite the new order, Airbus is expected to fall behind rival Boeing
The contract reaffirms AirAsia, Asia's largest low-cost carrier, as the world's largest A320 customer and second only to leasing giants in the number of Airbus planes ordered.
Wearing a jaunty red baseball cap, Fernandes set out even more ambitious dreams for AirAsia, which was struggling when he bought it just over a decade ago.
"One day, Air Asia would be as well known as Coca Cola. That would be cool. That is a massive ask," he said.
AirAsia placed a record 200-plane Airbus order in 2011 and fresh talks between the groups, initially for 50 jets, were first reported by Reuters in May.
But the European planemaker's chances for a deal were thrown into doubt when Fernandes held surprise talks with Canadian planemaker Bombardier
The talks, noticed by a Reuters sports correspondent, were held at Silverstone on the eve of the British Grand Prix. Fernandes owns a race team and a soccer club.
By September, industry sources said AirAsia and Airbus were closing in on an expanded deal for 100 aircraft.
"It's a huge ask for anyone to come in to AirAsia. We have to be responsible to our shareholders and be open to it," Fernandes said on Thursday.
Airbus and Boeing dominate the jet market but face a growing challenge from Canada's Bombardier as well as China and Russia.
Bombardier's CSeries aims to compete directly with the world's best-selling aircraft, the 150-seat Airbus A320 and Boeing's 737, and a deal with AirAsia would have been a coup.
Airbus Chief Executive Fabrice Bregier denied the Canadian group's model had ever seriously threatened the AirAsia deal.
Bombardier says its 130-seat jet is more modern and predicts sales will increase after a maiden flight due next year.
Fernandes said that he was buying the new Airbus planes mainly to grow his fleet, rather than to replace old aircraft.
He added that the company has no plans to look at a rights issue, saying that the transaction could be funded through cash. He also said the company is in a position to offer a dividend but gave no more detail.