"Careem and Uber are joining forces. We have reached an agreement in which Uber will acquire Careem for $3.1 billion," a joint statement said.
Under the deal, Careem will become a wholly owned subsidiary of Uber but will continue operating independently. Careem will retain its branding, services and separate app.
Uber will pay $1.4 billion in cash and the remaining $1.7 billion in convertible notes, the statement said.
"Uber will acquire all of Careem's mobility, delivery, and payments businesses across the greater Middle East region, ranging from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates," the statement said.
"This is an important moment for Uber as we continue to expand the strength of our platform around the world," Uber chief executive Dara Khosrowshahi said.
Careem chief executive and co-founder Mudassir Sheikha welcomed the acquisition, saying it will be good for customers.
"Joining forces with Uber will help us accelerate Careem's purpose of simplifying and improving the lives of people, and building an awesome organisation that inspires," Sheikha said.
The acquisition is subject to regulatory approvals and the transaction is expected to close in the first quarter of 2020.