The company, which will invest pounds 1.8m in the laboratory over five years, will have worldwide rights to develop and market products.
The venture follows earlier collaborative work between the company and the university leading to the development of an Aids vaccine which has been approved for trials in the UK.
Under the latest agreement the laboratory will target vaccines for viruses including chicken pox, shingles, herpes and hepatitis. The aim is to engineer a completely safe version of the natural virus which could be used to create immunity in patients.
Similar technology will be used to develop ways of stimulating an immune response to proteins which exist on cancer cells.
Keith McCullagh, chief executive of British Bio-technology, said the joint venture would channel basic research at Oxford into usable products.
The company, which has yet to make a profit, said in July that its research and development budget would increase from pounds 11.5m in 1991 to pounds 15m this year to provide for better revenue flows later.
Dr Alan Kingsman, director of the new Collaborative Laboratory and university lecturer in biochemistry, said: 'Our previous work has led to a potentially successful treatment for Aids.
'Now the work of the laboratory will extend the applications to new areas and new diseases.'