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The former Coupland's bakery site at 644 Great King St will house the restaurant, which offers Mexican-inspired fare such as tacos, burritos and quesadillas.
About 30 jobs in Dunedin will be created.
The eatery will be the third Taco Bell to open in the South Island after a Christchurch location opened in July, with a second location in the Canterbury city opening next month.
The new restaurants are part of a push from brand operator Restaurant Brands to have over 25 locations by 2024.
A consent for the land use in Dunedin was granted in June last year, and allows for seating for 30 people and 12 onsite car parks.
The maximum allowable opening hours would be between 6am and 11pm Sunday to Thursday, with extended evening hours to midnight on Friday and Saturday.