Uber will invest $225 million in the new company and Yandex $100 million, putting its value at over $3.7 billion.
Yandex will take 59,3% of the shares, leaving 36,6% to Uber and 4,1% to the NewCo staff.
"Partnership with Uber will help us broaden the quality of our service and the geographic scope of our business", says Tigran Khudaverdian, the director of Yandex.Taxi, director of the joint venture.
The deal has echoes of Uber's previous moves in China, where the company sold its operations wholesale to native ride-sharing firm Didi Dache (滴滴打車) past year.
In a blog post addressed to Uber employees, the head of Uber in Europe, the Middle East and Africa, Pierre-Dimitri Gore-Coty, said, "This is an exciting opportunity in a unique situation and our operations in other countries will not be affected".
After selling its Chinese business in August past year, Uber has now yielded its clout overseas again - this time to merge its Russian business with the taxi arm of Russian search engine giant Yandex.
As part of the deal, Uber will contribute its food delivery business, UberEATS, to the venture. Investors have raised questions as recently as this month about Uber's continued losses in India and Southeast Asia, asking privately whether the company would be better served by cutting deals with market leaders Ola and Grab, two people familiar with the matter said. Yandex's service, Yandex.Taxi, also operates in Armenia and Georgia.
Yandex said the agreement won't change anything for the users, everything will be available on the two apps as before. It's a roaming deal similar to what US ride-hail rival Lyft attempted with China's Didi and other regional competitors. According to the release from Uber and Yandex, "For the foreseeable future, the Uber and Yandex brands and rider apps will continue to operate, while the driver apps will be integrated after the transaction closes". The driver apps, however, will be combined.