The supermarket giant is looking to rapidly expand its Tesco Personal Finance arm and is creating an initial 200 new jobs at the InterPoint office at Haymarket.
It is also to relocate another 250 staff to the new HQ from a Royal Bank of Scotland office at The Gyle from where it used to run the business when it was a joint venture with the Edinburgh-based bank.
As the company, now fully owned by Tesco after buying out RBS's 50 per cent stake last year, continues to expand its services, it is expected that even more jobs will be created at the office.
Jobs created at the new HQ will include all the posts expected in a financial services firm, including finance, risk, human resources, operations and IT. The majority of the new posts are in the process of being filled and it is expected to begin operating at the new site in the next three months.
Benny Higgins, chief executive of Tesco PF and a former head of retail banking at HBOS, said its existing operations in the city made Edinburgh the natural choice for the new HQ.
He said: "It was the most natural place to do this, although not the only place.
"The people who have built this business have done a very good job and we wanted them to be part of the future. We knew we needed to expand numbers and we would have to augment our team with people with expertise. We judged that Edinburgh was a very good place to do this.
"It does have a very strong reservoir in financial services. I guess there will also be people inevitably who are unsettled by what's happened in the last few months or year."
The company already has six million customer accounts, 2.7 million general insurance customers, almost eight per cent of the credit card market and 4.5 per cent of the car insurance market.
It is looking to continue to expand and enter both the mortgage and current accounts markets. However, Mr Higgins ruled out the "unsustainable" lending practices of the past and said the focus would be on responsible lending.
A series of new in-store finance branches are also expected to be rolled out, including in Edinburgh, following the success of a pilot in Silverburn, Glasgow.
The expanding operations could lead to more jobs becoming available at the Edinburgh HQ.
"There's a lot that could go on in the coming years that could give rise to increasing the numbers in the office," he said.
Owen Kelly, chief executive of Scottish Financial Enterprise, said: "This is an exciting announcement and a great reminder that Scotland remains an important global financial centre. Tesco Personal Finance's decision to create its headquarters in Edinburgh, along with hundreds of new jobs, is a boost for the city."
Finance Secretary John Swinney added: "Despite a global economic downturn and severe challenges facing parts of the financial services sector, there continue to be opportunities for growth."