Ministry of Defence land outside Bicester has been shortlisted as a possible site to house 750 asylum-seekers.
The Home Office is looking at eight sites around the country and will choose four to become new centres.
If Bicester is chosen, the centre is expected to be built on one of three surplus sites the Bicester Defence Storage and Distribution Centre -- formerly Bicester Ordnance Depot -- is vacating by 2005, following a defence review.
The three sites are beside the Bicester-Thame road and Widnell Lane, Piddington; opposite St George's Barracks in Arncott; and off Palmer Avenue, Arncott.
The first two sites are the most likely to be used as they will be vacated earlier than the third, a communications hub for the centre.
The Home Office says the centre would operate an "open door" policy, with asylum-seekers free to come and go. Oxfordshire already has a secure detention centre at Campsfield House, Kidlington.
About 1,500 asylum-seekers would pass through a centre every year, staying roughly six months while their applications to stay in Britain are being processed and appeals considered.
The Home Office predicts that between 300 and 400 new jobs would be created.
Bicester's MP, Tony Baldry, was told about the proposal by Home Office Minister Lord Rooker, and said he was concerned about the news. Mr Baldry said: "This is one of a number of sites being looked at. I have no objection in principle but I need to see the detail.
"We do need a better system for looking after asylum-seekers.
"We shall have to wait and see what is brought forward, if anything.
"There is a lot of MoD land in and around Bicester -- both used and disused. We need to know exactly what is planned and where."
The Mayor of Bicester, Cllr Lawrie Stratford, said: "I am surprised at this plan, given the increasing problems we have at Campsfield House. I had not heard about it earlier."
Shoppers in Bicester town centre wanted to know more about the Home Office plan.
Matthew Cross, of Lime Crescent, Southwold, said: "It depends where the asylum-seekers are from.
"I work in London and we have a lot of problems with some of them. My initial reaction is to be a bit wary."
Susan Folkes, of Rookery Way, King's End, Bicester, said: "I have not got any view either way. It is hard to know what the implications are."
Catherine McGregor, of Germander Way, Bure Park, Bicester, said: "I guess it would be fine. If the new jobs help the community, then I think it is a good thing."
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