7digital, which has created download stores for several content partners, will power HMV's online music store in the UK and Canada, providing access to a catalogue of over six million tracks, from all four major labels.
The deal also includes a selection of video content via 7digital branded stores and an e-book store for Waterstone's.
HMV customers will have access to the 7digital Locker, allowing them to download previously purchased digital media to any computer or device with an internet connection.
The company will also develop a number of mobile apps for HMV, which will allow users to purchase and download media on their phones to sync with their home computer.
The investment is the latest in a string of partnerships for 7digital. The company currently provides download services for Spotify, Last.fm, and will soon launch an mp3 download application for RIM's BlackBerry devices.
Ben Drury, chief executive of 7digital, said: "The widespread adoption of the mp3 format has raised the profile of legal downloading amongst consumers and the market is continuing to grow.
"We already provide a number of high profile clients with successful download services and are confident we will see similar success with this venture."