Ocado said that the aim of the partnership is to "allow Kroger to redefine the grocery customer experience in the U.S. through the adoption of the centralised, automated model of online retailing provided by the Ocado Smart Platform".
Kroger shares were last up 1.6 percent on the deal, with investors reassured by the USA company saying the move would not dampen expected earnings for 2018 and 2019.
"We look forward to innovating together with Ocado to provide our customers the best possible online and in store experience", said Alex Tosolini, senior vice president of Kroger business development.
He said Kroger, which had sales of $122 billion in its last fiscal year, was the grocer best-positioned to succeed in the USA sector.
Tim Steiner, CEO of Hatfield, England-based Ocado Group, noted that the alliance provides the opportunity to revamp the grocery shopping experience for Kroger's customers as well as the way US consumers buy groceries.
Kroger, which is increasing its stake in Ocado to a total of more than 6%, hailed the Ocado deal as "innovative, exciting and transformative".
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'The opportunity to partner with Kroger to transform the way in which United States customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado, ' he said.
The two companies are working to identify the first three sites in 2018.
Instacart now delivers groceries for Kroger stores in 45 US markets, including Ralphs in Southern California, Mariano's in Chicago and King Soopers in Denver. Retailers are experimenting with different ways of delivering online grocery orders, seeking to balance speed with cost as e-commerce takes off for food.
"Ocado has really awesome technology that works", said Ken Lonyai, Independent Consultant and Strategist, in a RetailWire discussion. It has struck partnerships with Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden.
Shares in the group, which listed in 2010, jumped over 50 percent in early Thursday to trade at a record high.
"Amazon has indeed fuelled a US Ocado deal, ' said Peel Hunt analyst James Lockyer, who rates the shares a 'buy" and placed his target price under review.