The car manufacturer will also have a seat on the board of directors and a 50/50 joint venture with the company will see them build a 16GWh battery gigafactory in Germany.
Construction of the facility is scheduled to start in 2020, with battery production expected to begin towards the end of 2023 or beginning of 2024.
It is initially expected to produce 16GWh of batteries in the first year and expand production to 24GWh in the following years.
Dr Stefan Sommer, Member of the Volkswagen AG Board of Management responsible for Procurement, said: “Volkswagen is laying the groundwork at all levels for the successful implementation of its electrification strategy.
“With Northvolt, we have now also found a European partner whose know-how and sustainable, CO2-optimized battery cell production processes will enable us to advance cell production here in Germany. The prerequisite for this is, of course, the creation of the necessary economic framework.”
The deal is subject to approval from the Swedish competition authority.
Volkswagen Group and Goldman Sachs Merchant Banking Division are leading a $1 billion (£0.79bn) equity capital raise in Northvolt, alongside BMW Group, AMF, Folksam Group and IMAS Foundation.