The move could allow for rapid vaccinaton around the world.
Oxford has teamed up with AstraZenenca for the development, manufacture and large-scale distribution of the jab candidate that is currently being tested.
Human trials of the vaccine developed by the University's Jenner Institute began last week, with hundreds of people volunteering to be part of the study which received £20 million in Government funding.
Sir John Bell, Regius Professor of Medicine at Oxford University described the decision as a "major force in the struggle against pandemics" for the foreseeable future.
Speaking on Radio 4's Today programme, Sir John said he hoped that some results from a human trial of the vaccine would be available by the middle of June.
He added that the challenge now is to be able to manufacture at scale once it is approved by the regulators.
Sir John said: "We also want to make sure that the rest of the world will be ready to make this vaccine at scale so that it gets to populations in developing countries, for example, where the need is very great.
"We really need a partner to do that and that partner has a big job in the UK because our manufacturing capacity in the UK for vaccines isn't where it needs to be, and so we are going to work together with AstraZeneca to improve that considerably."
It is the first such partnership to be formed since the Government launched the Vaccines Taskforce two weeks ago to help find a new coronavirus vaccine.
Both partners have agreed to operate on a not-for-profit basis for the duration of the pandemic, the university said, with only the costs of production and distribution being covered.
Health Secretary Matt Hancock said it was "hugely welcome news."
He tweeted: "The Oxford vaccine is one of the most advanced in the world. Bringing together the best British science and the best of British business will give us the best possible shot at a vaccine.
"The science is uncertain, and no vaccine may work, but this deal gives the UK the best chance we can of a breakthrough that could defeat this awful virus. I'm sending best wishes for good fortune to all involved - for the sake of the nation and indeed the whole world.
The details of the agreement are set to be finalised in the coming weeks.