Shares of the retailer gained as much as 5 percent in midday trading. The stock later pared its gains, but still ended the day more than 2 percent higher.
The company is planning to dedicate 500 square footage of space, with a majority of the shops located in the men's department, according to a statement released on Wednesday.
"Nike is immensely popular across all categories and with the rapid rise of activewear and athletic shoes, we want to have the best expression of Nike in any department store," John Tighe, chief merchant for J.C. Penney, said. "J.C. Penney is an activewear destination, and by partnering with a perception-shifting national brand like Nike, we can deliver both the performance and athleisure products that customers want. Shoppers browsing our new Nike environments will be both inspired and motivated to take their athletic wardrobe to the next level."
The in-store Nike shops will sell Dri-FIT base layer pants, mesh shorts, jogger pants, moisture-wicking compression tees, performance socks, and breathable hoodies. The stores will also include a variety of workout accessories, such as weighted jump ropes, water bottles, workout gloves, gym socks, and sweat bands.
Department store sales have struggled to compete with Amazon and were the worst-performing retail segment in December, with sales down 8.4 percent over the prior year, according to the Commerce Department.
Last week, J.C. Penney's CEO, Marvin Ellison, announced the company is planning to downsize.
J.C. Penney shares closed on Tuesday at $6.94 a share.