The Phone House operates 30 shops under its own brand and another 50 stores for Deutsche Telekom and generates annual sales of about €350m.
Dixons Carphone did not disclose the value of the deal but said it will receive a three per cent stake in Drillisch, with the potential for further deferred payments from future excess cash flows.
Drillisch has a market value of about €2.1bn (£1.5bn), which would put the value of three per cent of shares at around €60m.
The sale is expected to complete before the end of May at the latest.
Dixons Carphone has been restructuring its German business after tough trading conditions in the country. It has already announced the closure of its wholesale operations, which will allow it to focus on other markets.
Chief executive, Sebastian James, said: “[This] is a positive move to secure the future of the significant remaining operations within The Phone House Deutschland through a partnership with Drillisch.
“At the same time, this transaction enables Drillisch to broaden its horizons into wholesale connection and dealer operations.”
Dixons and Carphone merged last year in a bid to take on rivals such as AO World by offering everything from products to services, such as a subscription to Netflix or Sky.