The deal is expected to be finalised by early next year, and is said to be worth around £1.25bn.
"While some work still remains to be completed before signing - including final documentation, financing and government approvals," said Ford in a statement. "Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010, with closing of the sale likely to occur in the second quarter 2010, subject to appropriate regulatory approvals."
Once the deal is signed, Ford is expected to retain no stake in Volvo.