The deal expands an existing relationship. It also calls for AOL to help eBay to expand in international markets.
Both companies had been rumored to be in talks for a closer alliance. This deal does not call for AOL to take any equity stake in eBay.
"This agreement is great for AOL members and users of our family of brands because it further expands their already dynamic online community, giving them easier access to the largest person-to-person trading community in cyberspace," said AOL president Bob Pittman in a statement.
Added Meg Whitman, chief executive of eBay: "This alliance not only provides us significant customer acquisition opportunities, it serves as an important brand investment."
Internet companies increasingly are turning to co-branding alliances to build traffic in a hotly competitive market.
Ebay stock jumped 15 percent this morning on the news, trading at 161 as of 8 a.m. PST. One brokerage firm, Pacific Crest, upgraded the stock to "strong buy" from "buy."