The mega-deal will give the group a foothold in the online video sector targeting an advertising market estimated to be worth nearly £380bn.
Verizon is also seeking to bolster its “internet of things” platforms - which tap into latest technology meaning household appliances can be controlled through the touch of a mobile device.
AOL owns The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com.
Verizon said it would pay £32 per share for the company in cash, a 15 per cent premium to AOL’s closing price at the close on Monday.
Lowell McAdam, Verizon chairman and chief executive, said: “Verizon’s vision is to provide customers with a premium digital experience based on a global multi-screen network platform.
“This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.
“AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally-connected world.”
The deal, subject to regulatory approval, is set to complete this summer. AOL boss Tim Armstrong will continue to lead its operations.
It comes 14 years after AOL’s ill-fated £116bn takeover of TV, film and publishing conglomerate Time Warner in what was the biggest and what turned out to be most disastrous deal of the dotcom boom.
By 2009 it had completely unravelled and the companies went their separate ways. AOL’s value plunged as the global economic slowdown eroded advertising revenue.
The AOL acquisition comes after Verizon, America’s largest mobile firm as well as an internet and TV provider, last month said it is preparing to launch a video service targeting mobile devices and was seeking partners to deliver the content.
Its name will be familiar to British investors after Vodafone last year sold its 45 per cent stake in joint venture Verizon Wireless to Verizon in a £78bn cash and shares deal.