The deal will also support the launch of next-generation Aston Martin models.
The two firms have signed a letter of intent today, and a definitive agreement is expected to be signed before the end of the year.
As part of the deal, Daimler AG will own up to five per cent of non-voting shares in Aston Martin and will join existing shareholders including Investment DAR and Investindustrial.
Although part of the deal ensures a supply agreement between AMG, Daimler and Aston Martin, the British firm will continue to manufacture all of its sports cars at its Gaydon facility.
Aston Martin development boss Ian Minards said: “Aston Martin sources cutting-edge technology from key suppliers around the globe and the opportunity to include content from Mercedes-AMG GmbH in our next-generation sports cars is, clearly, good news.
“Working with Mercedes-AMG in this way while, of course, remaining independent and preserving the unique character and style of Aston Martin that has been the mainstay of the company throughout its 100-year history, points to a very bright future for the company as it starts its second century in business.”
AMG boss, Ola Källenius said: “We are proud to work with Aston Martin and provide them with powertrain and electric/electronic 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.”