Nissan Motor has taken a 34% controlling stake in Mitsubishi Motors, with an investment of 237 billion yen (£1.52bn).
Nissan chief executive and president Carlos Ghosn (pictured) said the alliance would cover purchasing, common platforms, joint manufacturing, technology development and target shared cost savings.
“It represents a win-win. We believe in the potential of Mitsubishi Motors,” he said.
“This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors. It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies.
"We will be the largest shareholder of MMC, respecting their brand, their history and boosting their growth prospects. We will support MMC as they address their challenges and welcome them as the newest member of our enlarged alliance family.”
Osamu Masuko, chief executive at Mitsubishi Motors, said he hoped the deal with Nissan would restore confidence in the company.
Mitsubishi Motors has admitted to manipulating fuel economy data of four models, two of which are supplied to Nissan, and improperly testing other Japan models since 1991.