Lotus will switch from Renault to Mercedes engines in 2015.
The team have ended their long-term relationship with Renault to switch to Formula 1's best engine in an attempt to improve their competitiveness.
Lotus finished fourth in the constructors' championship last season but have slipped to eighth this year.
Chief executive officer Matthew Carter said Lotus saw the deal as "one step" towards their aim of winning races again.
The Oxfordshire-based team replace McLaren, who start a new partnership with Honda next season, as one of three Mercedes customer teams.
The deal, described as "long-term", has been in the offing for some months but an announcement was delayed while Lotus resolved their situation with Renault, with whom they struck a new three-year agreement before the start of this season.