Volvo will make the cars and sell them to Uber, the two firms revealed today, investing a combined $300m on the project.
The so-called base car will be manufactured by Volvo and then be adapted by Uber which is working on its own driverless technology. Volvo will also use the same base cars "for the next stage of its own autonomous car strategy".
Volvo's driverless car plans include testing them on London's roads next year, while Uber is already trialling the technology on the roads of Pittsburgh in the US using Ford Fusion cars.
"This alliance places Volvo at the heart of the current technological revolution in the automotive industry," said Volvo chief executive and president Hakan Samuelsson.
Uber boss Travis Kalanick said: "By combining the capabilities of Uber and Volvo we will get to the future faster, together.”
Uber's Advanced Technologies Centre, located in the US city, has hired top robotics engineers from Carnegie Mellon university to develop self-driving technologies.
Now, it plans to bring the new Volvos - based on Volvo's XC90 SUV - to Pittsburgh's roads imminently, meaning anyone ordering a car can choose the new driverless vehicle (albeit with a human driver ready to take control at any time) marking a huge breakthrough in the practical application of the technology.
Kalanick discussed his hugely ambitious plans to commercialise the technology in an interview with Bloomberg.
"We are going commercial. This can’t just be about science," he said.
Ushering driverless cars would make drivers unnecessary for Uber, although analysts believe they are still more than a decade away from becoming mainstream.
It comes as Uber launches legal action in the London high courts over new rules for drivers in the capital.