The Chinese car manufacturer Geely has signed a deal to buy Volvo from Ford for $1.8bn (1.2bn).
The sale is expected to be completed by the end of the year.
'This agreement provides a solid foundation for Volvo to continue to build its business under Geely's ownership,' said Alan Mulally, Ford's president and CEO.
'At the same time, the sale of Volvo will allow us to further sharpen our focus on building the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world.'
Volvo sold outright
Ford won't retain any ownership in Volvo, but will continue to supply Volvo with powertrains and other vehicle components.
As part of the sale, Ford has also committed to provide engineering support, information technology, access to tooling for common components, and other selected services for a transition period to ensure a smooth separation process.
Geely says it intends to preserve Volvo's existing manufacturing facilities in Sweden and Belgium, while exploring opportunities to build new factories in China.
Li Shufu, Chairman of Zhejiang Geely Holding Group, 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.'
Stephen Odell, CEO of Volvo Cars, added: 'The Volvo management team fully endorses Ford's sale of Volvo Cars to Geely. We believe this is the right outcome for the business, and will provide Volvo Cars with the necessary resources, including the capital investment, to strengthen the business and to continue to move it forward in the future.'
Ford paid 4.34bn for Volvo when it bought it in 1999 and had been trying to sell it since 2008.
Geely, founded in 1986, is China's tenth largest car maker.