The new company will be named Harpia Sistemas S.A. and is being formed by Elbit's AEL Sistemas S.A. and Embraer Defesa e Seguranca S.A.
Under several agreements, Embraer Defesa will own 51 percent of the venture, with AEL owning the remainder. Embraer Defesa also acquired a 25 percent stake in AEL.
"The creation of Harpia is in perfect alignment with Brazil's national defense strategy and it will be an important instrument for meeting the needs of the armed and the security forces," Embraer Defesa President Luiz Carlos Aguiar said.
"Furthermore, the potential for dual application of unmanned aerial systems and the technology generated through it must also be highlighted."
Joseph Ackerman, president and chief executive officer of Elbit Systems, said: "The establishment of this jointly owned company is a significant step for Elbit Systems and AEL, marking another milestone in our long-term operations in Brazil, a market which we consider of the utmost importance.
"These transactions take the collaboration between Embraer Defesa and AEL to new heights, which we are confident will be of mutual benefit to both of our companies as well as to the Brazilian customers."
The new company will have headquarters in Brasilia. In addition to UAS aircraft, avionics systems and simulators, it will act as a contractor for logistics support in those areas.