The US telecoms company has made an offer of $50 a share - a premium of 17.4 per cent on AOL's closing share price yesterday of $42.59.
Shares in AOL, the owner of online publications such as Huffington Post and Techcrunch and a host of advertising technology products, rocketed more than 18 per cent as US markets opened, continuing a similar surge in pre-market trading.
AOL chief Tim Armstrong will remain on board at the company, which will be run as a subsidiary of Verizon.
In an email to staff, Armstrong said:
Today, we are announcing that the largest and most innovative wireless and cable company – and the one investing the most in high quality mobile content – is acquiring AOL with the strategy of building the biggest media platform in the world. The company is Verizon and the deal will game-change the size and scale of AOL’s opportunity. Just as AOL has propelled The Huffington Post, Adap.tv, TechCrunch, and other companies we have acquired, Verizon will propel AOL and comes to the table with over 100 million mobile consumers, content deals with the likes of the NFL, and a meaningful strategy in mobile video.
"Verizon's vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience," said Verizon chairman and chief Lowell McAdam.
AOL was infamously involved in one of the most disastrous deals in corporate history. During the dot-com boom, the company merged with established media company Time Warner, but separated after just 10 years together.
The online company which still offers dialup internet services, bought Time Warner for $186bn in 2000 - still the largest M&A deal ever made. Today's offer by Verizon values AOL at a fraction of what it was worth at the height of its power in the noughties.
The deal is expected to close this summer.