As part of the new agreement, IBM's database and WebSphere software will be used on Inspur's servers, which are the first high-end hardware to be wholly developed and produced by a Chinese company.
Inspur also will be using IBM's Power8 chips to help design its own systems.
The deal sets aside the two companies' rivalry, which has been spurred by tensions between the U.S. and Chinese governments over claims of cyber spying and hacking.
Inspur has been working to try to persuade Chinese regulators that a switch to domestic chip and server makers is possible and preferable.
The Chinese government is investigating whether this country's banking sector's reliance on internationally-developed hardware and software poses a threat to national security.
The new collaboration between IBM and Inspur comes on the heels of the US government okaying IBM's sale of its low-end server business to Chinese IT firm Lenovo.
For more on this, we are joined on the line by Mike Bastin, Visiting Professor at China's University of International Business and Economics.
