Partners at both firms voted overwhelmingly for the union which has won approval from the Luxembourg Bar Association and will take place from 1 January 2000.
The marriage to Faltz & Kremer, the country's sixth largest firm with 20 lawyers, gives Clifford Chance a foothold in Luxembourg's lucrative banking market.
The new firm will be officially called Faltz & Kremer in association with Clifford Chance.
Clifford Chance corporate partner, Tim Herrington, who led the negotiations with Faltz & Kremer says the Luxembourg firm has many synergies with his firm.
He adds: "Luxembourg has developed a major business centre playing a key role in a number of our clients' cross-border European finance and corporate transactions."
Faltz & Kremer's managing partner, Christian Kremer says: "The merger gives us the opportunity to expand our international expertise in response to our clients' business needs. We are sure that our clients will appreciate the significantly enhanced service we will be able to provide.