The largest drug store chain in the US has signed a 6.7 billion US dollar (£4.3 billion) deal to take a 45% stake in Alliance Boots and could take full control by 2015.
Walgreens, which also trades as Duane Reade, said the strategic partnership with high street chain Boots, which is the market leader in Europe, will create the first global pharmacy business, with 11,000 stores in 12 countries.
The cash and shares deal will also create the world's largest purchaser of prescription drugs and the biggest pharmaceutical and wholesale distribution network.
The partnership will deliver to more than 170,000 pharmacies, doctors, health centres and hospitals in 21 countries.
The tie-up will bring together an "unparalleled portfolio" of retail businesses and brands by combining the Alliance Healthcare, Boots, No7 and Botanics brands with the Walgreens and Duane Reade names.
Alliance Boots executive chairman Stefano Pessina said the deal offers significant growth opportunities and marks "a very positive milestone for the healthcare industry as a whole".
He added that the fit between the two companies was "natural" because Walgreens' profile in the US was similar to its own in the UK, where it operates more than 2,500 stores.
Alliance Boots was taken private in an £11.1 billion takeover in 2007 by private equity firm KKR and Mr Pessina. It employs around 75,000 staff in the UK.
The stores will continue to operate under their existing brands. The companies said they have no plans to make any redundancies because the two businesses complement each other.
Alliance Boots is committed to keeping its current support offices across Europe as well as its operational hub in Nottingham.