Volvo's parent company Ford on Sunday signed a deal selling the Swedish company to Chinese carmaker Zhejian Geelyn, dpa reported.
Geely wants to double Volvo's current output of 300,000 vehicles per year by increasing sales in China over the coming years.
Ford had set a price tag of 1.8 billion dollars, less than a third of what it paid for Volvo in 1999. Of that money, 1.6 billion dollars is to be paid in cash.
Both businesses said that the final details would be agreed by the end of third quarter.
A loan of 445 million dollars for Volvo from the European Investment Bank had been approved. However, because of high Chinese state subsidies for Geely, this would have to be re-examined, it was reported.
Geely is China's biggest private carmaker and produces around 300,000 cars a year. Chairman Li Shufu has announced the building of a new factory near Beijing to produce Volvo cars.
Production in Sweden and in the Belgian town of Ghent, which employs a total of around 20,000 workers, is set to continue.
After the signing, Shufu promised to maintain Volvo's excellent reputation for safety, quality, environmental standards and modern Scandinavian design.