Under the deal, AOL internet access CDs will be made available at point-of-sale in Blockbuster stores, giving consumers the opportunity to try its AOL 9.0 service for free.
The alliance will also see Blockbuster's online DVD rental service promoted to AOL's 2m UK members through its entertainment channel.
Blockbuster's high street operation has struggled in recent years, and has been slow to adapt its business model to take advantage of the rise in popularity among consumers of renting online.
The deal, Blockbuster's first with a major portal, is critical in revitalising the brand and closing the gap on more nimble players such as Video Island and Lovefilm, which launched much earlier and have reaped the benefit of first-mover advantage.
Alex Sparks, Blockbuster UK managing director, said the deal 'reflects how serious Blockbuster is about developing our online business'. The service will also be promoted in key relevant areas across AOL including the music, games, men and women channels.
The online rental service costs from £13.99 a month for three DVDs. For a limited period, AOL and Blockbuster customers will be able to take advantage of a free one-month trial of the service.
The deal builds on a strong start to the year for AOL, which in February saw the start of its valuable distribution deal with the Dixons Store Group (replacing rival Wanadoo) for its narrowband service to be made available in Currys, Dixons, PC World and The Link.