In addition to the deal, the companies will ink a four-year agreement to co-produce a new car buying resource featured on Lycos, dubbed The Lycos/Autoweb Channel. The companies will split revenues derived from e-commerce and advertising on the site.
They also plan to develop wireless and automotive Web access applications during their agreement.
Terms of the deal were not disclosed. But given Autoweb's last closing price of $3.97 a share, the stake could be valued at more than $10 million.
The companies also said Autoweb will pay Lycos "multimillion dollar" payments over the course of their four-year deal. A Lycos representative would not elaborate on the payments but said they were part of the agreement to offer Autoweb content on Lycos.
Shares of Autoweb opened strong in early trading, jumping almost 9 percent to $4.31.
Lycos is the latest Web player to take a stake in an online car service. In January, e-commerce giant Amazon.com bought a 5 percent stake of Greenlight.com with the option to increase its stake to 30 percent.