The combined entity, to be called DowDuPont, will be eventually split into three independent companies focused on agriculture, materials and specialty products.
Dow and DuPont shareholders will each own 50% of the combined company, said the two firms.
The split into three independent operations is set to take place 18 to 24 months after the completion of the merger, which is subject to regulatory approval.
Advisory committees will will established for each of those businesses.
DuPont chief executive Ed Breen said the “merger of equals” will create significant value in the immediate period.
The deal, said the chemical giants, is expected to see around $3bn in cost savings, with 100% of that cost cutting expected to be realized during the first two years.
And they said an extra $1bn should also be generated from growth synergies.
Breen is to become CEO of the new entity, while Andrew Liveris, Dow's current CEO, will be executive chairman of DowDuPont.
"This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders," said Liveris.
Market analysts see the deal as creating significant competition for Monsanto and Syngenta in terms of genetically modified seeds and crop protection.
DuPont’s existing portfolio also includes the Danisco Animal Nutrition’s range of feed enzymes, probiotics, natural betaine and essential oils. DuPont bought Danisco for $6.3bn in 2011.
The new specialty products business, to be set up as a result of the merger, will include DuPont's nutrition and health business, as well as its industrial biosciences, safety and protection and electronics and communications divisions, and the Dow electronic materials business.
Dow and DuPont said each business will benefit from “more targeted investment in their productive technology development and innovation capabilities.”
Combined pro forma 2014 revenue for specialty products is said to be $13bn.
Breen said: “Longer term, the three-way split we intend to pursue is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each business will be a leader in attractive segments where global challenges are driving demand for these businesses' distinctive offerings."
In a separate announcement today, DuPont revealed a global cost savings and restructuring plan designed for 2016 to facilitate savings of $700m compared to 2015.
The plan will involve job cuts, said the US chemical group, with around 10% of DuPont's global workforce to be impacted.
As a result of these actions, DuPont said it expects to record a pre-tax charge to earnings of about $780m, consisting of $650m of employee separation costs and about $130m of asset-related charges and contract terminations.