The deal comes as Stellantis is reportedly looking to sell factories in France, Italy or Germany to Dongfeng that are currently running below capacity in a European market struggling with the shift to electric vehicles.
Two "new energy" Jeep models will be built at Dongfeng's Wuhan factory starting in 2027, as well as two new Peugeot designs, for both China and export markets "as part of Peugeot's international growth plan".
"Stellantis and Dongfeng are ready to further leverage their strengths and introduce all-new vehicles with cutting-edge EV technologies from brands that customers worldwide trust and love," Stellantis chief Antonio Filosa said in a statement.
Filosa, an Italian veteran of Fiat, was brought in as CEO last July to restructure the automaker's operations and restore profitability.
The company had announced last week that it was considering strengthening its alliance with Leapmotor so the Chinese group can produce its own cars at two of the European auto manufacturer's Spanish plants.
European carmakers are eyeing deals with Chinese rivals to help them compete on the continent, where car sales have yet to recover from the Covid pandemic downturn amid stiff competition.
Chinese companies meanwhile are looking to Europe to counter soft domestic demand.
Stellantis said a total eight billion yuan ($1.2 billion) would be invested in the Wuhan project with Dongfeng, of which Stellantis would put in around 130 million euros ($150 million).
Dongfeng is one of the 10 largest Chinese automakers, and took a stake in France's Peugeot in 2013, before its merger with Fiat to forge a conglomerate whose brands also include Alfa Romeo, Opel, Maserati, and Ram and Dodge trucks.
It currently holds a 1.6 percent stake in Stellantis.
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