Announcing the deal, Minister for Defence Production Rana Tanveer Hussain said that the construction of the submarines would simultaneously begin in Pakistan and China.
"China would transfer the technology to Pakistan for submarine construction," he was quoted as saying by the Dawn.
He said the implementation of the agreement would augment the existing submarine related capacity.
One of the three Agosta 90-B submarines in Pakistan Navy's fleet was assembled at the Karachi Shipyard and Engineering Works in 2008.
The other two Agosta 90-B submarines were also indigenously overhauled and retrofitted with air-independent propulsion (AIP) systems in 2011.
The three Agosta 90-B submarines of French design form the core of Pakistan's current submarine fleet that also includes two ageing Agosta-70 submarines.
The minister did not specify when the construction would begin, but said it would be happening soon. A training centre would be set up in Karachi for this purpose.
He also did not specify the type of submarines but it was speculated that the deal was for Yuan-class Type-041 diesel-electric submarines equipped with AIP systems.
Pakistan had earlier explored the options of buying submarines from France and Germany but the deals did not materialise.