EDF Energy has reached an agreement with China General Nuclear Power Corporation (CGN) to build a nuclear power plant at Hinkley Point, Somerset.
It was confirmed at a news conference by Prime Minister David Cameron and Chinese President Xi Jinping.
EDF said that the final cost would be £18bn - China's state-owned CGN will pay £6bn for a one-third stake.
EDF said it might sell another 15% stake in the project, but would maintain a majority holding.
President Xi has been meeting Prime Minister David Cameron, on the second day of his UK state visit.
More than £30bn worth of deals between the UK and China are expected to be struck during the four-day visit.
The agreement also set up a wider UK partnership to develop new nuclear power stations at Sizewell and Bradwell.
While they have reached Strategic Investment Agreements for all three plants, only Hinkley has a target date - it is supposed to start generating in 2025.
BBC business editor Kamal Ahmed says the final investment decision, which should largely be a formality, by EDF and CGN will now be taken in the next few weeks.
Last month, Chancellor George Osborne visited China and secured the deal under which Beijing will invest in Hinkley Point.
The Hinkley Point project has come under fire over its cost and the delays to investment decisions and the timetable for building.
The government has also been criticised for guaranteeing a price of £92.50 per megawatt hour of electricity - more than twice the current cost - for the electricity Hinkley produces.
That could mean higher bills for consumers, critics such as Greenpeace say.
The government insists that 25,000 jobs will be created and enough energy to power six million homes.
Opponents have also raised security concerns about allowing China a central role in Britain's nuclear future.
But Lord Sassoon, chair of the China Britain Business Council, told the BBC's Today Programme he could not see what the problem was.
"Why would they want to turn off a nuclear power station in which they had some ownership?
"It doesn't seem terribly logical to me, except in extreme circumstances in which that would be the least of the UK's problems."
Meanwhile, from January, the government is planning to run a pilot scheme that will allow Chinese tourists to get a two-year tourist visa for £85 - these currently cost £324.
The prime minister's spokeswoman said the move was designed to boost the number of Chinese tourists coming to Britain.
The number has more than doubled over five years, with the tourism worth nearly £500m per year to the economy.