The factory near to the central city of Puebla will have a production capacity of 150,000 cars a year, the company said.
The company will manufacture conventional gasoline-powered versions of the SUV, and will later roll out greener models.
An employee in the Audi plant in San José Chiapa making a last quality check at the finish line.
"We will bring electricity and electrified versions (of the Q5 SUV) here to Mexico," Audi chief executive officer Rupert Stadler said in a press briefing following the inauguration.
"I'm talking about the plug-in hybrid in the first stage," he said.
Reuters reported in June that Audi, Volkswagen's luxury car brand, would make an electric version of the Q5 at the plant.
Earlier on Friday, Audi said in a statement that the new Mexican factory "will probably soon build an SUV that can drive in electric mode."
Stadler (left) receiving a gift from Puebla governor Rafael Mroeno Valle.
The Q5 on stage during the inauguration event in the Audi plant in San José Chiapa.
