The 75-year-old singer shared the news during Thursday's episode of Watch What Happens Live.
When asked why she and McEntire have never done a song together, Parton said she just recorded a song with McEntire for the 66-year-old singer's upcoming album.
"Reba and I just did a song together," Parton said. "It's on her album. We redid the song 'Does He Love You?' that she did years and years ago -- we did a new version of it."
"It turned out really good, because I've always wanted to sing with her and don't know why we never did it until now, but we really sounded good together," she added. "I think the fans are going to like it."
Parton last released the holiday album A Holly Dolly Christmas in October, while McEntire released her 33rd studio album, Stronger Than the Truth, in April 2019.
On WWHL, Parton also confirmed she will guest star on the Netflix series Grace and Frankie, which stars her 9 to 5 co-stars Lily Tomlin and Jane Fonda. The show will return for a seventh and final season this year.
"Actually, this is their last year, their last season, so we're figuring out how they want to use me. But I am absolutely going to be on it this year," Parton said.
Parton played Doralee Rhodes in 9 to 5, which opened in theaters in December 1980.
The singer made headlines last week after she recreated her iconic 1978 Playboy cover for her husband Carl Thomas Dean's 79th birthday.
"I was trying to think of something to do to make him happy," she said on Instagram. "He still thinks I'm a hot chick after 57 years and I'm not gonna try to talk him out of that."