Next has agreed to buy a 25% stake in smaller upmarket rival Reiss with an option to add to its holding and secure majority control.
The FTSE 100 fashion group will pay £33m for the stake and also provide Reiss with a £10m loan.
Reiss's online operations will from next year be contracted to Next, which will also provide it with warehouse and distribution services.
Next said that Reiss, which is led by former long-serving Next executive Christos Angelides, would retain creative independence under the deal.
"The intention is that Next's infrastructure - its online systems, warehousing, distribution assets and sourcing base - can serve as a launch pad for Reiss's growth plans, both in the UK and overseas," the company said in a statement.
The deal gives Next an option, which expires after next July, to buy an additional 26% stake, which would take its total holding to 51%.
Reiss, founded in 1971, operates in 14 countries via 79 stores and 104 concessions, as well as through wholesale and franchise operations.
It notched up annual sales of £227.4m in the year to 1 February 2020, up 22% on the prior year, before worldwide lockdowns struck.
Reiss is currently majority owned by US private equity firm Warburg Pincus with the family of founder David Reiss retaining a minority holding.
The deal comes at a time when the UK's high street sector is being reshaped by the impact of the coronavirus pandemic.
Next has been a resilient performer thanks to its big online business and chief executive Lord Wolfson has said the crisis would throw up takeover opportunities.
It has already expanded its beauty business by taking on five former Debenhams sites and taken a majority stake in a joint venture operating Victoria's Secret lingerie stores in the UK.
Next had also been involved in a bid to take over Topshop, part of Sir Philip Green's collapsed Arcadia empire, but pulled out earlier this year.
The demise of Arcadia and Debenhams - whose brands, but not stores, were eventually picked up by online retailers Asos and Boohoo - will mean a number of retail's best-known names not reopening on the high street even as pandemic lockdown measures are relaxed later this year.
Annual results published on Wednesday by Zara owner Inditex, which reported a 70% fall in profits to €1.1bn, highlighted the impact of COVID-19 on the sector globally.