Canadian Prime Minister Justin Trudeau's Liberal minority government has reached a deal with the New Democratic Party (NDP) to stay in power until 2025.
In exchange, the Liberals will support the left-leaning NDP on several of the party's key priorities in parliament, reports BBC.
Mr Trudeau said on Tuesday that he believes the agreement will provide "stability" for Canadians.
The move has been strongly criticised by Canada's Conservative Party.
Speaking at a news conference on Tuesday, Mr Trudeau said that the deal - which he termed a "supply and confidence" agreement - begins today and will continue through the end of Canada's current parliament in 2025.
"What this means is that during this uncertain time, the government can function with predictability and stability, present and implement budgets and get things done for Canadians," he said.
The deal differs to a coalition, where parties share power. Instead, the Liberals - who failed to win a majority in the past two elections - will continue to govern as a minority, but with assurances the NDP will support them in confidence votes.
While Mr Trudeau predicted that the two parties would continue to disagree in some areas, he said they had identified some key policy areas in which they share similar objectives, including healthcare, housing and the environment.
"These are things that fit within our universe of priorities, but are easy to move forward in a constructive way that assures that, on a broad range of issues, parliament gets to focus on delivering for Canadians," he added.
Last year, NDP leader Jagmeet Singh ruled out a formal agreement with the Liberals, but said that he was willing to support Mr Trudeau.
Ahead of Mr Trudeau's announcement, Candice Bergen, leader of Canada's Conservative Party, slammed the Liberal-NDP agreement as a "callous attempt by Trudeau to hold on to power".
"This is little more than backdoor socialism," she said in a statement. "This is an NDP-Liberal attempt at government by blackmail. Nation-building is replaced by vote-buying; secret deal-making over parliamentary debate; and opportunism over accountability."
Jagmeet Singh is expected to address the media later on Tuesday.