The investment will bring Kabam’s valuation to $1bn.
Chinese e-commerce giant Alibaba will invest $120m in California-based gaming startup Kabam, along with a partnership agreement which would allow Alibaba to publish some of the popular Kabam mobile games across its mobile apps Taobao and Laiwang.
The partnership with Alibaba will boost the gaming developer's resource, infrastructure and distribution capability, especially in China, which is said to account for half of the world's gaming market.
Kabam has developed games like Kingdoms of Camelot: Battle for the North, The Hobbit: Kingdoms of Middle-Earth, Fast & Furious 6: The Game, and Dragons of Atlantis: Heirs of the Dragon.
For Alibaba this new venture will let the company reach more users through gaming before the debut of its IPO in the US.
The e-commerce giant offers mobile games through Taobao, but faces tough competition from other Chinese company, Tencent, which has invested $231m in a US based gaming company Riot.
With the deal, Alibaba hopes to get an edge above Tencent, by bringing high quality gaming to its platform in China.
Patrick Liu, Alibaba Group President Patrick Liu said: "Alibaba is committed to collaborating with great games companies like Kabam to deliver captivating digital entertainment offerings to our users."
"The Kabam team has a track record of innovation and a strong entrepreneurial spirit, and this is exactly the type of company we want to support."