Stirling and Clackmannanshire councils will begin sharing some services by March 2011.
The deal between the two councils, to jointly deliver education and social services, was agreed by councillors in Stirling on Monday evening.
Clackmannanshire Council ratified the proposal at a meeting last week.
The councils hope to save money through reducing senior posts, taking advantage of vacant posts in both councils and through joint purchasing.
But both authorities said they would retain control over policy and service levels for their areas.
Joint heads of service will now be appointed for education and social services. Both will report direct to the chief executives of Clackmannanshire and Stirling.
Further discussion with staff and trade unions will also take place.
Several local authorities in Scotland have already announced similar sharing schemes.