"It is the largest single firm order number for large jets in commercial aviation history," Airbus said in a statement, although the company has signed contracts worth more financially.
The low-cost airline has signed a memorandum of understanding to acquire 150 single-aisle A320neo jets. The neo versions - "new engine option" - are equipped with more efficient engines and fuel-saving wing tips.
IndiGo is the first client for this new version of the aircraft, which Airbus only unveiled last month and plans to start delivering in early 2016. The other 30 planes are to be standard versions of the A320.
The value of the deal was not announced, but according to Airbus`catalogue price the sale is worth USD 16.4 billion (126 billion euros)
IndiGo is the only Indian carrier to have ordered 100 aircraft from Airbus earlier, and the order is currently in the process of being delivered.
"This order for industry leading fuel efficient aircraft will allow IndiGo to continue to offer low fares," said Rakesh Gangwal and Rahul Bhatia, co-founders of IndiGo.
The aircraft are expected to deliver fuel savings of up to 15 per cent, with corresponding cuts in pollution.
"Ordering more A320s was the natural choice to meet India`s growing flying needs. The opportunity to reduce costs and to further improve our environmental performance through the A320neo were key to our decision," they said in a statement.
John Leahy, Airbus` Chief Operating Officer for Customers, said the deal gave IndiGo a strong position in the fast growing Indian air travel industry.
"This order positions IndiGo to take full advantage of predicted growth in Indian air travel and we are delighted they continue to build their future with Airbus," he said.
Airbus said it has delivered some 4,500 of the aircraft to 310 airlines, with another 1,300 on the order books, making it the world`s best-selling single-aisle aircraft family.
The A320neo is Airbus` bid to counter rival aircraft such as Canada`s Bombadier CSeries and China`s C919, as well as heading off Boeing, which has not yet decided on the future of its medium-haul 737. Airbus will offer airlines a choice of motors on its A320neo.
They will be able to choose between the latest model from CFM International, a joint venture between France`s Safran and General Electric in the United States, and a US Pratt & Whitney engine.
IndiGo had not yet decided what engine it wanted for its models and would make an announcement at a later date, Airbus said.