The venture will be based in Hong Kong and will see each party invest $100m (£72.6m). The venture will provide technology and support to Legend FM, which operates the mainland Legend portal fm365.com.
The structure sees Legend hold 51% of the joint venture company and AOL the remaining 49%.
It is hoped that the joint venture will eventually buy the mainland portal, giving AOL entry into mainland China. For this to happen, it still has to overcome Chinese wariness of foreign-owned content sites.
AOL hopes that China's long-anticipated entry into the World Trade Organisation later this year will go some way to achieving that.
Gerald Levin, chief executive of AOL Time Warner, said, "Our announcement today in China is a major step toward fulfilling the promise of the internet around the world."
Legend is a majority state-owned company, which is listed in Hong Kong.