The £1.2 billion deal is less than Ford paid for the Swedish manufacturer, but Ford will still supply powertrains and other vehicle parts for certain periods of time to ease the transition.
Ford will also share research, engineering and support with both Volvo and Geely once the sale is finalised in the third quarter of 2010.
Alan Mulally, Ford’s president and CEO, said: “Volvo is a great brand with an excellent product lineup. This agreement provides a solid foundation for Volvo to continue to build its business under Geely’s ownership.
“At the same time, the sale of Volvo will allow us to further sharpen our focus on building the Ford brand around the world and continue to deliver on our One Ford plan serving our customers with the very best cars and trucks in the world.”
The sale is the latest involving Asian manufacturers after the sale of Jaguar Land Rover to Indian company Tata Motors in 2008.
Geely has confirmed Volvo cars will still be produced at the Swedish plant, although it will consider manufacturing plants in China.
Meanwhile, Ford will focus its attention on the Ford brand, including the forthcoming Ford Focus RS500 model.