Volvo has struggled to increase sales and has not made a profit since 2005
The Chinese car maker Geely has signed a deal to buy Volvo from US car giant Ford for $1.8bn (£1.2bn).
The agreement, which was first announced in December, is the biggest overseas purchase by a Chinese car manufacturer.
"Today represents a milestone for Geely," the company's chairman Li Shufu said.
Loss-making Volvo has been on the market since 2008, when Ford put it and several other brands up for sale.
Jaguar and Land Rover in the UK have already been sold to India's Tata Motors.
Ford hopes that the sale of Volvo will help it pay off its debts and focus on its core brands, following a dire period for the global car industry.
The deal represents a loss for Ford, however, having bought Volvo in 1999 for $6.5bn.
Geely, China's biggest independent car maker, has pledged to keep Volvo as a separate company with its headquarters remaining in Sweden.
Founded in 1986
Started as refrigerator parts supplier
Production capacity of 300,000 cars a year
However, significant manufacturing is expected to take place in China, making Volvos for Chinese consumers.
Analysts view the deal as a good one for Volvo, which has struggled to grow sales and has not made a profit since 2005.
That is in contrast to the Chinese market it will now have access to, which overtook the US last year as the world's biggest car market.
More than 13 million vehicles were sold in China last year - both passenger and commercial - a rise of nearly 50% on the previous year.
Geely says it expects annual sales in China to total 400,000 this year.
Its international sales are tiny by comparison, however, and the company is expected to benefit from the foothold in the European market that Volvo will give them.