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The deal was sealed on Tuesday between Nasa and the Indian Space Research Organisation, ISRO, in the southern Indian city of Bangalore.
The mission, called Chandrayaan-1, is set to launch next year or in 2008, according to the ISRO website, and will map the lunar surface using an array of sensors.
The collaboration - initially agreed on during a visit to India in March by George Bush, the US president - calls for two Nasa payloads to be carried to the Moon by a 525kg spacecraft.