The all-share deal will eventually lead to the merged company, initially to be called DowDuPont, being split in three.
The three companies would focus on agriculture, materials and speciality products.
If the merger is cleared by regulators, the new company will be owned equally by current Dow and DuPont shareholders.
The companies aim to achieve the split into three within two years of the completion of the merger.
They hope to save $3bn through cost-cutting during that period.
At the same time, DuPont announced a cost-saving plan that will involve cutting about 10% of staff.
Andrew Liveris, currently chief executive of Dow, will be executive chairman of the new company, while DuPont chief executive Ed Breen will be the new chief executive.
"This transaction is a game-changer for our industry and reflects the culmination of a vision we have had for more than a decade to bring together these two powerful innovation and material science leaders," Mr Liveris said.
Dow also announced that it was buying the glassmaker Corning out of their 50-50 joint venture, Dow Corning.
Dow Corning was formed in 1943 and makes silicon-based products for cars, aerospace and electrical uses.