Under their pre-existing agreement, Uber already uses various customised Volvo vehicles - which include some of the carmaker's own self-drive hardware - and then adds on its own proprietary artificial intelligence technologies. It would be the first of its kind.
Volvo Cars Chief Executive Hakan Samuelsson said, "We believe this is a new segment, a new business".
The deal marks a milestone step in the United States firm's transition from an app used to summon a taxi to the owner and operator of a fleet of cars.
U.S. eyes N.Korea talks if missile tests end
That visit came as the US and Sudan, encouraged by Israel and Saudi Arabia, moved to improve ties after decades of hostility. North Korea has said it can not abandon its nuclear programme, which it says is necessary as a deterrent to a USA threat.
Without the cost of having to pay a driver, self-driving taxis are expected to cost significantly less than traditional taxi and Uber rides.
The deal builds on a $300 million alliance Volvo announced with Uber previous year focused on collaborating on the design and financing of cars with self-driving systems, which require different steering and braking features and sensors. The non-exclusive and non-binding deal would take things a giant step forward and allow Uber to launch autonomous operations on a commercial level starting in 2019.
She said the new agreement puts Uber on the path toward rolling out mass-produced autonomous cars at scale.
The tests are being conducted in Tempe, Arizona, and Pittsburgh.
Competitor Waymo recently announced plans to begin its own autonomous ride-hailing service, which may be the reason for Uber accelerating its plans, Tech Crunch reported. "Uber will adapt the software to make it ride-hailing". Among those that have agreed to test autonomous vehicles on Lyft's platform are Delphi Automotive Plc's NuTonomy, Ford Motor Co., Jaguar Land Rover and Waymo.