Baidu (BIDU.O) will provide Shouqi with its Baidu Map service, while Shouqi will help Baidu develop high-precision maps for self-driving cars.
Baidu will also offer software and hardware to help the new vehicles navigate using artificial intelligence technology.
The Chinese internet company is trying to reshape its business around AI and autonomous driving, a strategy that has raised concerns among some investors.
Shouqi Limousine & Chauffeur, a subsidiary of the state-owned Shouqi group, operates in more than 50 cities in China.
Baidu recently signed an agreement with BAIC Group to mass produce level 4 autonomous vehicles by 2021. It is targeting mass production of autonomous buses with King Long by 2018.