According to Xinhua report, the agreement was inked by Li Shufu, founder and chairman of Geely, and Lewis Booth, chief financial officer of Ford.
Under the definitive stock purchase deal, Geely will own 100 per cent of Volvo Cars and its related assets.
"The agreement provides a solid foundation for Volvo to continue to build its business under Geely's ownership," Booth said.
"China, the largest car market in the world, will become Volvo's second home market. Volvo will be uniquely-positioned as a world-leading premium brand, tapping into the opportunities in the fast-growing China market," Li said.
Li promised that Geely will maintain the strong collaborative relations that Volvo has built with employees, unions, suppliers, dealers and above all, customers.
Volvo, which has about 22,000 workers around the world including 16,000 in Sweden, was purchased by Ford in 1999 for about $6.4 billion.
But Ford has been attempting to sell Volvo since late 2008, due to its poor market performance.