Publisher Pearson and German media group Bertelsmann are to combine their Penguin and Random House businesses.
Under the terms of a deal announced on Monday, the two businesses will be run in a joint venture called Penguin Random House.
Bertelsmann will own 53% of the joint venture, while Pearson will own 47%.
The BBC reports the tie-up between Penguin and Random House marks the first deal between the world's big six publishers. The others are Hachette, HarperCollins, Macmillan and Simon Schuster.
Industry observers said last week that such deals were inevitable as the companies seek to adapt to the changing publishing landscape. They are being hit by the proliferation of ebooks and closures of book retailers.
Penguin chairman and chief executive John Makinson will be chairman of the merged group, with Random House boss Markus Dohle becoming chief executive.
Based on recent results, combining the two firms will create a business with annual revenues of about £2.5 billion and have about a quarter of the book markets in Britain and the United States.
In 2011, Random House's revenues were 1.7 billion euros with an operating profit of 185 million euros. Penguin recorded revenues of £1 billion and an operating profit of £111 million.
The joint venture is subject to regulatory approval, but the BBC reports the two companies are confident of gaining this.
The companies say their brands, or imprints, will retain their editorial independence.