The deal will take the form of a mix of shares and cash, valuing Baker Hughes shares at $78.62.
The mammoth buyout comes as the price of oil keeps falling, making oil companies more attractive to potential suitors as their value decreases.
The price of Brent Crude has dropped from $109 a barrell to about $80 in recent months, and are expected to stay low, averaging out at about $83 during 2015. Since July, shares in Baker Hughes have fallen 32 per cent, wiping $10bn off its market cap.
Dave Lesar, Halliburton's chief executive, said the new company will "deliver unsurpassed depth and breadth" of services.
[It will create] a houston-based global oilfield services champion, manufacturing and exporting technologies, and creating jobs and serving customers around the globe.