BMW and China's answer to Google, Baidu, will pilot driverless cars on Chinese roads over the next two years.
BMW will build prototype autonomous cars to trial the technology in Beijing and Shanghai as part of the research project.
The German carmaker conducted a similar trial on European roads including German autobahns (the government-controlled motorway) last year.
But China's expanding urban centres will throw up certain challenges like multi-level motorways, it said.
A statement on BMW's website read: "The BMW Group believes that highly automated driving will play a major part in ensuring sustainable personal mobility in the future. An "electronic co-pilot" system is not only able to relieve the driver of monotonous or repetitive driving tasks, but can also take over full control of the vehicle if desired."
It is hoped the trial will answer questions over liability and insurance claims for driverless cars.
It added: "BMW is taking on this new engineering challenge because it believes that only with a complete command of all the technical fundamentals will it be possible to help clarify the legal issues surrounding highly automated driving."
Baidu operates China's largest search engine and is also a provider of map services and cloud services. BMW did not reveal how much Baidu would be funding or the cost of the research project overall.
Similarly, Google announced this year that it is investing in driverless technology.