Biofuels company Firefly plans to develop the plant in Harwich, Essex, and hopes to supply fuel by 2028.
The company has reached an agreement with Wizz Air to supply up to 525,000 tons of SAF over 15 years.
Firefly's CEO, James Hygate, said that biosolids are "a kind of disgusting thing", but "a fantastic resource".
"We're turning sewage into jet fuel. I can't think of many things that are cooler than that," added Hygate.
The production of SAF involves using around 70% less carbon than conventional jet fuel, but it is several times more expensive to produce.
Utility company Anglian Water has committed to supplying the biosolids - a product of its wastewater treatment process - to Firefly as part of an initial pilot phase.
Paul Hilditch, Firefly's operations director, said there were enough biosolids in the UK to meet "half of the mandatory demand for SAF by 2030″.
"And not just in the UK, of course. Anywhere in the world where there are people, there is poo," he added.
Firefly said it was obtaining regulatory approval for its system to be used to fuel planes.
Wizz Air has also announced that it hopes to power 10% of its flights with SAF by 2030.
Yvonne Moynihan, head of corporate affairs and ESG (environmental, social and governance) at Wizz Air, said that finding a sustainable fuel is crucial to reducing aviation's carbon emissions.
She said that an "increase in SAF production" would be necessary and called on policymakers to support investment.
The government wants at least 10% of the UK's aviation fuel to be produced from sustainable raw materials by 2030.
