Bondholder Rolls-Royce will collaborate with Airbus on the development of a new engine that is 25% more fuel efficient.
The agreement will see the two companies work together on ground and flight tests of the new Ultrafan engine.
Rolls-Royce have recently started work on a £90 million testbed facility at their Derby Sinfin site which could be used to test the new engine.
Andy Geer, Rolls-Royce's chief engineer and head of programme for the UltraFan, said: "This is another step forward in our UltraFan engine journey and it is great to have Airbus expertise to further strengthen our ability to deliver this important development programme."
Axel Flaig, head of research and technology programme at Airbus, said "This technology development programme with Rolls Royce is a key project for Airbus to pave the way towards the next generation of integrated propulsion systems that will be needed by airline customers towards the end of the next decade."
Airbus, which is headquartered in Toulouse, France has recently opened a new office at the iHub, managed by Bondholder Connect Derby, due to its proximity to Rolls-Royce.