The link-up brings together two airlines with a combined fleet of nearly 900 aircraft and 126,000 employees. Together, they flew 90 million passengers last year on a route network covering nearly 400 destinations.
The aim of the agreement is to extend Lufthansa's reach in the domestic US market - the biggest in the world - beyond the three 'gateway' airports of Chicago, Washington and San Francisco, and increase United's access to Germany beyond Frankfurt.
The system of code-sharing enables passengers to fly from one destination to another on two different airlines but using a single ticket, as if it were a through service.
From the beginning of next year, the two carriers will code-share on four routes across the Atlantic and 24 domestic destinations in Germany and the US. Under phase two of the agreement, there will be code-sharing on a further 100 destinations.
In early January, United will also begin feeding its long-haul transatlantic passengers flying into Heathrow on to Lufthansa flights to Berlin, Hamburg and Munich.
Passengers on one airline will also be able to participate in the other's frequent-flyer programmes and use their business class lounges.
Unlike other transatlantic alliances, such as between British Airways and USAir, no equity will change hands, but the concept is the same: to carve out a bigger share of one of the busiest air routes between the US and Continental Europe.
The Lufthansa-United link-up follows last month's signing of a new air services treaty between Germany and the US, allowing carriers from both countries increased operations across the Atlantic and greater access to each other's domestic market.
The alliance ends United's long search for a new European partner airline following the demise of its marketing agreement with BA.
For Lufthansa, the increased revenues and cost savings that the tie-up promises should help in its run-up to privatisation.
The German government is still said to be on course to float its 51 per cent holding next year but preparations have become mired in a wrangle over how to replace the state pension fund that Lufthansa's employees belong to.
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