Penguin, owned by the British education giant Pearson, confirmed it is merging with German media giant Bertelsmann's Random House.
It will create a company that has a 53% Bertelsmann holding and a 47% Pearson holding..
The joint venture named as Penguin Random House was initially announced in October 2012. The titles of the publishing house include the works of more than 70 Nobel laureates and hundreds of popular authors across the globe.
The expanded company will employ more than 10,000 people across five continents.
Penguin publishes more than 15,000 new titles annually and saw worldwide sales of £2.6bn (€3bn, $4bn) last year and a profit of £346m. According to a report, the new company is expected to earn revenues of around $3.9bn .
The merged entity, Penguin Random House, will have a 25% market share.
Penguin will shift its headquarters from Britain to New York, the home of Random House.
John Makinson, previously the chief executive officer of Penguin, has been appointed as chairman while Markus Dohle will be the CEO of the new venture.
Post-merger, both the publishing houses will bring together celebrated authors like Zadie Smith, Will Self and Jamie Oliver from Penguin; authors from Random House will include Dan Brown, Nicholson Baker and Fifty Shades of Grey writer E L James.
The company has assured that it will "continue to work closely with the many authors it has supported them throughout their careers, as well as attracting new talent".
The merger is in response to the challenges faced by the print sector as a result of the rising popularity of e-books and Amazon, the world largest online retailer.
Regulators from America, New Zealand, Australia, Europe, Canada, South Africa and China have approved the merger.