The joint venture agreement, under which the China Airlines Group will hold a 90% stake and Tiger Airways 10%, was signed Sunday, China Airlines spokesman Pierre Yang said.
Making the announcement to coincide with the company's 54th anniversary, China Airlines chairman Sun Huang-hsiang told a press conference at Taoyuan International Airport that Tigerair Taiwan will cover major destinations in Northeast and Southeast Asia, Hong Kong, Macao, mainland China, as well as Taiwan.
Mr Sun said the market potential for low-cost carriers is promising.
"Our goal is to expand the number of aircraft to 12 in two to three years," he said.
Koay Peng Yen, Tigerair's chief executive officer, said the joint venture between China Airlines and Tiger Airways will "change the landscape of aviation in Taiwan."
He said the people of Taiwan will benefit from the partnership by having more visitors and more options to travel.
China Airlines, Taiwan's biggest carrier, was founded in 1959 and flies to 109 destinations in 29 countries, including cargo and code-sharing services.
Tiger Airways, established in 2004, is a part of the Singapore Airlines Group and flies to 50 destinations in 13 countries in the Asia Pacific region.