The deal will see Grab merging Uber's ride-hailing and food delivery businesses with its own operations. Meanwhile, the San Francisco-based company will acquire a 27.5 percent stake in Grab and Uber CEO Dara Khosrowshahi will join the firm's board.
Uber's app will run for two weeks to give existing drivers time to move onto the Grab platform, while the Uber Eats app will continue till end of May.
Monday's announcement will be the third time that Uber has either sold or merged one of its businesses outside the U.S. Uber previously sold its China business to ride-hailing rival Didi Chuxing and merged its operations in Russia and neighboring countries with local tech company Yandex.
In emails to Uber employees, Khosrowshahi said Uber was not on a consolidation path.
"One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors," Khosrowshahi added. "
He explained in the email that the deal with Grab puts Uber in "a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don't."
Khosrowshahi wrote that around 500 Uber employees in Southeast Asia would move over to Grab. An Uber spokesperson said some staff would remain part of Uber's Asia Pacific operations and that there would not be any lay-offs as part of the deal.
Earlier this year, SoftBank completed its long-awaited investment agreement with Uber, making the Japanese tech giant the firm's largest shareholder. That led some to wonder if there would be consolidation in the Asian ride-hailing industry since SoftBank also has investments in Grab, Didi Chuxing and India's Ola.
Since taking over from co-founder Travis Kalanick in August, Khosrowshahi has focused on cleaning up Uber's battered reputation and instilling financial discipline to push toward profitability.
The firm's loss surged 61 percent in 2017 to $4.5 billion, though its loss in the fourth quarter narrowed from the prior period. Last November, Khosrowshahi said Uber had plans to try and go public by 2019 and that "the numbers support" the move.
Grab provides transportation, food delivery, mobile payments and financial services and operates in 195 cities across Southeast Asia. The company claimed to have 95 percent market share in taxi ride-hailing when it announced plans to raise more than $2.5 billion from SoftBank and other investors in 2017.
— CNBC's Alex Sherman and Reuters contributed to this report.