Ferrari will supply Formula One newcomers Red Bull Racing with engines for 2006 and 2007, the world champions said on Saturday.
The deal is likely to see the Swiss Sauber team, who have been powered by Ferrari engines for the last nine years, switch to BMW while leaving privately-owned Cosworth with just struggling Minardi.
"We are pleased to have reached this agreement with Red Bull Racing to supply them with our F1 engines," Ferrari team boss Jean Todt said in a statement.
"This collaboration fits in with the fact that, since 1991, with a break from 1993 to 1996, Ferrari has supplied its F1 engines to other teams."
Red Bull, owned by Austrian energy drink billionaire Dietrich Mateschitz, are using Cosworth engines this year as a legacy left behind when they bought the Jaguar team from Ford last November.
Ford also owned Cosworth until last year when Champ Car team boss Kevin Kalkhoven bought the company to ensure an engine supply for the US based series.
"Ferrari is synonymous with success in Formula One," said Red Bull team boss Christian Horner.
"This is an enormous boost for the team and underlines our commitment to compete at the forefront of Formula One."
FERRARI ALLY
The deal could also give Ferrari an ally in their struggle with the sport's other manufacturers.
The Italian team are currently alone in agreeing, with the governing International Automobile Federation (FIA) and Formula One supremo Bernie Ecclestone, to an extension to 2012 of the sport's existing commercial agreement after its expiry in 2007.
Their carmaker rivals are still planning their own championship from 2008.
While Red Bull are supportive of the other teams on voluntary testing restrictions, they and Jordan broke ranks in joining Ferrari at an FIA meeting in Paris last week to discuss the technical rules from 2008.
BMW motorsport director Mario Theissen, whose company had been discussing a supply to Red Bull, said Sauber are now the only team they were talking to.
"There is no decision yet," he said. "I can only say that talks are going well. The probability of coming to an agreement is higher than 50 percent."
Theissen said Sauber would get the same engines as Williams, but there would still be a special relationship with the former champions.
"As it looks now, Williams is certainly more than just a team we supply with engines. It is a cooperation that goes beyond engine supply and there is no decision to change that," he said.
Peter Sauber said that while his team had enjoyed nine 'excellent years' with Ferrari, they were "sure that we will have a very competitive engine next year."