The money would be spent on energy projects, a standard gauge railway linking the port of Mombasa to border town of Malaba, meant to provide faster access from Kenya's port to markets in the region, the presidency's media service said in a statement on Monday.
"The rail link, particularly, is important in the context of East Africa's shared goal of ensuring quicker movement of peoples, goods and services," it quoted Kenyatta as saying.
The money would also be used to improve wildlife protection, in a country where well-armed criminal gangs hunt elephants for tusks and rhinos for their horns that are often shipped mainly to China for use in ornaments and medicines.
It was not specified whether the money was a loan or grant, or whether this was all new money or part of a previously negotiated but unannounced package.
On Monday, President Xi Jinping said China supports Kenya's quest for industrialisation and plans to host a clearing house for the Chinese renminbi currency in Nairobi, as part of Kenya's plans to become an international financial hub. Kenya is also set to become the first oil exporter in East Africa by 2016.
Kenyatta's "vigour" would lead Kenya to "greater accomplishments", Xi added.
Premier Li Keqiang said China and Kenya have maintained sustainable and healthy relations since the establishment of diplomatic ties 50 years ago, and both sides should cooperate to bring bilateral ties to a higher level.
Bilateral trade reached $2.8 billion last year, according to data provided by the Chinese embassy in Nairobi.
Li said China will continue to support Africa’s integration process and make further contributions to secure peace and development on the African continent.
The deal marks a deepening of ties between Africa and China, as Beijing is keen to expand its investment and profile in Africa. The continent is a key exporter of oil and other natural resources, helping fuel the Asian giant's rise to become the world's second largest economy.