YouTube is on course to fulfil its ambition to launch a music streaming service that would rival Spotify and Apple Music.
In a move first reported by Bloomberg, Universal Music Group said the deal with YouTube would give its artists more flexibility and better pay.
YouTube is promising the stronger policing of user uploads of copyrighted songs.
The service, slated to launch in the spring of 2018, will also be a threat to Vevo, which this week lost CEO Erik Huggers.
Warner Music Group, the third major label, signed a new deal with YouTube in May.
Facebook has also been in conversation with music groups for the past 12 months.
The majority of paid music services charge subscribers £10 per month. The most popular service is Soundcloud, but few of its 175 million subscribers pay for the privilege.