The proposed deal will see Aston Martin access significant Mercedes-AMG GmbH and Mercedes-Benz Cars' resources, allowing the development of bespoke V8 powertrains and the use of certain components of electric/electronic (e/e) architecture.
Daimler AG will own a stake of up to 5% non-voting shares in Aston Martin, depending on the progress of the agreement.
The company will join the existing shareholders that include Investment DAR, Adeem Investment and Investindustrial.
The technical partnership will support Aston Martin's launch of a new generation of models that will incorporate cutting edge technology and newly-developed bespoke V8 powertrains.
Aston Martin Product Development Director Ian Minards said: "We have selected AMG specifically as the basis for this powertrain development process."
Ola Källenius, Head of Mercedes-AMG GmbH, said: "We are proud to work with Aston Martin and provide them with powertrain and components for their forthcoming sports cars.
"This is proof of AMG's technological and performance expertise and a real win-win situation for both sides."