Officials from both countries participated in a signing ceremony in the Congolese city of Kananga late Monday.
Congo's Energy Minister Gilbert Tshiongo said the plant, when completed, will have a capacity of 65 megawatts.
The project is part of Congo's effort to address power shortages and develop the country's infrastructure. Analysts say the country has huge hydroelectric potential because of its many rivers.
The deal calls for India to cover about 60 percent of the plant's $280 million cost, with the DRC picking up the rest.
Tshiongo said construction on the plant in Kasai Occidental province will begin in the next few months and will take about four years.