Under the deal, worth $900 million, Volvo Trucks will acquire a 45-percent stake in the Chinese company's Dongfeng Commercial Vehicles (DFCV) unit, giving it effective joint control with Dongfeng Motor.
Volvo is currently ranked third behind Dongfeng and Daimler but the tie-up will give the venture top spot.
In 2011 Volvo produced 180,000 units, 6,000 fewer than Dongfeng, but a large part of the Chinese firm's production will pass to the new subsidiary.
Another Chinese automaker, Geely, owns Volvo Cars, bought from Ford Motor in 2010, but it has struggled to boost profits as the brand's market share has fallen.
