The firm said the new jobs would include full and part-time positions, and some apprenticeship placements for new employees.
Tesco is the country’s largest private sector employer with more than 290,000 staff – a quarter under the age of 25.
Prime Minister David Cameron said the news was a “massive confidence boost for the UK economy”.
“Their commitment to creating jobs and opportunities for young people at what is a difficult time for the economy is fantastic news for the UK as a whole and for those people they will help into work,” he said.
Economy ‘on way back’
Tesco UK chief executive Richard Brasher told the BBC the extra jobs would not be offset by job losses elsewhere in the business.
Continue reading the main story
“This is net job creation, although we will continue to run our business as efficiently as we can, this is a determination for this to be net new jobs,” he said.
But he admitted the supermarket had found it difficult to predict job numbers the past.
“I think it would be fair to say in 2007 it was very difficult to estimate looking forward what the economy would bring us, I think we are a lot clearer now, I think we are on the way back rather than on the way down,” he added.
In its statement, the company said the new staff would be used to improve service to customers.
“In unprecedented economic conditions like these, major businesses have a big responsibility to step forward, invest and create jobs,” said Mr Brasher.
“We will invest in more staff on the sales floor at busy times, greater expertise and help in the crucial areas of fresh food, and enhanced quality and service across our stores at all times.”
A Tesco spokeswoman said she could not say exactly how many of the 20,000 jobs were full-time or part-time positions, or apprenticeship placements for new starters.
However, she said there was a total of 10,000 apprenticeship placements for new and existing staff.
Last month, Tesco was targeted by Right to Work activists over one of the government’s work experience scheme.
The pressure group occupied a Tesco branch near the Houses of Parliament – leading to its temporary closure – after a job advert for night-shift workers offered Jobseeker’s Allowance plus expenses.
Tesco said the advert had been a mistake caused by an IT error and said the impression it was seeking to replace full-time workers had been mistaken.
In January, the supermarket giant had Ã‚Â£5bn wiped off its stock market value in a single day after it revealed poor Christmas trading.
Tesco reported a 2.3% decline in like-for-like sales excluding VAT and petrol in the six weeks to 7 January, falling below its own expectations.
More than one million 16-24 year-olds are unemployed.
Last week, the government announced changes to its work experience scheme so that youngsters would not lose their benefits if they left placements early, following criticism of the sanctions attached to the programme.
Youngsters on the scheme are not paid wages but still receive their benefits.
Ministers say it has been a success, with around half those on work experience coming off benefits.
But the Right to Work campaign is continuing to hold protests against firms taking part, warning it will target restaurant chain McDonald’s later this week.