The joint venture called SB Cloud Corporation will be 60 percent owned by SoftBank with 40 percent owned by Alibaba.
SB Cloud will open a new data center in Japan and allow Alibaba to sell its cloud services to customers ranging from start-ups to multinational companies.
The move marks AliCloud's latest international expansion plans which kicked off last year. In July 2015, Alibaba said it plans to invest $1 billion in cloud computing globally and struck a number of partnerships with the likes of Intel. It also opened up a headquarters in Singapore for its international cloud business and has built two data centers in Silicon Valley.
Alibaba is looking to pose a serious challenge to the likes of Amazon and Microsoft in the cloud space and so far its efforts have been paying off. The company's cloud computing and infrastructure business grew 175 percent year-over-year in the quarter ended March 31 to $165 million.
By partnering with SoftBank, Alibaba will get access to a wide range of customers and local expertise of the market.
The financial terms of the deal were not disclosed.
"I believe the JV team can develop the most advanced cloud platform for Japanese customers, as well as for multinational customers who want to use the resources we have available in Japan," Eric Gan, chief executive of SB Cloud, said in a press release.