Customers can swap to the PayPal payment option by opening iTunes and navigating to the settings menu, where it is listed as an option.
The move is surprising since Apple tends to avoid third party services that compete with the tech giant. PayPal didn't say how much of the revenue generated from each purchase will be given to Apple.
"While difficult to size, the deal is significant as it provides yet another example of a payment for (Apple Pay) choosing to work with PayPal as a payment partner," JPMorgan's Tien-tsin Huang said in a note Wednesday.
Shares of PayPal were up 3.5 percent in premarket trading.