The two firms have been fierce competitors, but Didi Chuxing dominates the Chinese market with an 87% share.
Uber China launched in 2014 but has failed to make any profit so far.
Cheng Wei, founder and chief executive of Didi Chuxing, said the two companies had "learned a great deal from each other over the past two years in China's burgeoning new economy".
He added that the deal would "set the mobile transportation industry on a healthier, more sustainable path of growth at a higher level".
