Financial terms of the deal were not disclosed.
Nortel will own a majority interest in the joint venture, and it will be based in Ottawa, Canada, the companies said in a statement. Joint development of new products has already begun. The joint venture is expected to be formed by the third quarter of this year.
Also as part of the deal, Nortel will begin selling Huawei broadband products. Huawei is a leader in broadband access gear sales.
The joint venture will develop a portfolio of products designed to deliver converged networks that will work with copper, fiber and fixed wireless networks. The resulting products will be sold by Nortel and Huawei.
"Nortel is focused on seizing opportunities that will generate new revenue and expand operating margin. This joint venture is a bold opportunity to combine the strengths of Huawei and Nortel into a company that can aggressively target and win share in the rapidly expanding ultra broadband market," said Mike Zafirovski, president and chief executive officer of Nortel. "This will create a powerful new player in what is a high growth market."