The new firm, effective on 1 January 2001, will be called Reed Smith Warner Cranston in the UK, Reed Smith elsewhere, and will boast 670 lawyers.
The US firm will send the head of its business and finance department to the London office in the new year.
Warner Cranston senior partner Ian Fagelson says: "It's no secret that we have had many approaches from US firms. The fact that this deal has actually been completed is itself testament to the compatibility of our two firms."
He says the two firms have common practices in insurance, finance, banking and e-commerce