Telugu Desam Party (TDP) chief N. Chandrababu Naidu announced the poll pact with the Bharatiya Janata Party (BJP) in the presence of BJP and the National Democratic Alliance (NDA) leaders.
The TDP, which had fought the 1999 election in alliance with the BJP, had pulled out of the NDA after the latter's defeat in 2004.
Naidu told reporters that the TDP entered into an alliance with the BJP to serve the national interest.
The former chief minister said the TDP and BJP were capable of freeing the country from corruption. He was confident that the NDA would get more than 300 Lok Sabha seats.
BJP's national spokesman Prakash Javadekar said the two parties would work together in both Telangana and Seemandhra regions.
BJP treasurer Piyush Goyal said the TDP's return would strengthen the NDA.
The TDP and BJP leaders formalized the deal under which BJP will contest 47 assembly and seven Lok Sabha seats in Telangana and 15 assembly and five Lok Sabha seats in Seemandhra.
The TDP as the major regional party will contest 72 assembly and 10 Lok Sabha seats in Telangana and 160 assembly and 20 Lok Sabha seats in Seemandhra.
Elections to 119 assembly and 17 Lok Sabha seats in Telangana are scheduled for April 30 while 175 assembly and 25 Lok Sabha constituencies in Seemandhra will go to the polls May 7.
The breakthrough in alliance talks came Saturday night after the intervention of the top leaders of the BJP and the TDP. At one stage, the talks appeared to have collapsed.
Akali Dal leader and NDA co-convenor Naresh Gujral besides Javadekkar and Goyal held talks with TDP leaders at a hotel.
The TDP leaders who held the talks were Sujana Chowdhary, E. Dayakar Rao, Y. Ramakrishnudu and M. Narasimhulu. Javadekar met Chandrababu Naidu twice Saturday.