Nokia has signed a definitive agreement with China Huaxin to merge the vendor's China business with Alcatel-Lucent Shanghai Bell.
The rebranded Nokia Shanghai Bell (NSB) will become a hub in China for developing the likes of IP routing, optical, fixed and next generation technologies, Nokia said.
Both companies have effectively been working together since January last year when an interim agreement was signed.
The deal will formally close in July, once administrative, legal, regulatory and other conditions are cleared, with Nokia the majority shareholder, owning 50 percent plus one share.
The joint venture will have one board of directors and one management team.
Nokia said the business will focus on research and development with 16,000 staff working across six sites in China.
Rajeev Suri, President and CEO of Nokia, said: "Today's agreement is historic for Nokia and for China, marking the next step of our decades-long commitment to the country and underscoring China's leading role in developing next-generation communication technologies.
"Nokia Shanghai Bell will enhance our ability to innovate, helping us strengthen ties with communication service providers and expand to new, fast-growing sectors in need of high-performing networks."
Yuan Xin, General Manager of China Huaxin, said: "We are fully confident in the new joint venture's success during the industry transformation brought by the new technologies like 5G and IoT.
"The successful combination globally and in China brings together the leading E2E network technologies and most powerful innovation engines from both sides."