Ghosn made the announcement as he appeared with Mitsubishi Motors chairman Osamu Masuko in a hastily called joint conference in Yokohama, where Nissan is based
Ghosn said Nissan will invest 237 billion yen (£1.4bn) to become the top investor in Mitsubishi Motors.
Masuko said Mitsubishi group companies will continue to hold stakes in the carmaker.
Mitsubishi Motors has been recently rocked by a scandal over cheating on mileage tests to inflate mileage for minicar models.
Masuko apologised for the scandal but welcomed the alliance with Nissan.
Ghosn, who engineered Nissan's alliance with Renault, said adding Mitsubishi will be a plus in sharing platforms, purchasing and technology.