The first title to be created as part of the agreement is based on the Pikmin franchise and will be designed to encourage walking amongst players.
Moreover, the game – to be released later this year – will be the first project created by Niantic Tokyo Studio, which was established in April 2018.
"Niantic's AR technology has made it possible for us to experience the world as if Pikmin are secretly living all around us", said Nintendo representative director Shigeru Miyamoto.
"Based on the theme of making walking fun, our mission is to provide people a new experience that's different from traditional games. We hope that the Pikmin and this app will become a partner in your life."
Last year, it was heavily rumoured that the Japanese games giant would give up on its mobile games division.
However, the company squashed those claims, and the new deal with Niantic further cements Nintendo's commitment to smartphone experiences.
As of September 2020, Nintendo's mobile library – Miitomo, Super Mario Run, Fire Emblem Heroes, Animal Crossing: Pocket Camp, Dragalia Lost, Dr Mario World, and Mario Kart Tour – has crossed 650 million downloads.
Meanwhile, Niantic has experienced great success with its augmented reality titles, Pokemon Go, Harry Potter: Wizards Unite and Ingress.
In 2020, Pokemon Go soared past $4 billion in lifetime revenue, proving that it continues to be as popular as it was back when it first hit the market in 2016.
"As we continue to expand our games portfolio, it was a natural next step to team up with Nintendo," said Niantic CEO John Hanke.
"We're looking forward to shaping the future of AR together, bringing Nintendo's beloved game characters to life for mobile game players around the world."