The proposed tie-up with Cinema City will give it leading positions in Poland, Israel, Hungary, Romania, the Czech Republic, Bulgaria and Slovakia. The cash and shares deal, which is due to complete in March, values Cinema City at around £500 million.
Cineworld Group currently operates 102 sites under the Cineworld and Picturehouse brands, including five out of the 10 highest-grossing cinemas in the UK and Ireland last year.
The merged group will have 201 outlets and 1852 screens across Europe, with the addition of 966 from Cinema City making it the second largest operator in Europe behind Odeon UCI, which has more than 2100 screens.
The new company will be run by current Cinema City chief executive Mooky Greidinger, whose family started the predecessor to Cinema City in 1929 and opened its first cinema in Haifa, Israel, in 1931.
Israel was Cinema City's sole country of operation until 1997, when the company expanded into central and eastern Europe with the launch of operations in Hungary.
Cineworld said the deal provided attractive prospects in developing economies where the presence of multiplex screens is still low. The average ticket price in Romania in 2012 was around £3.15, compared with £6.37 in the UK.
Cineworld will pay £272m and offer a 25% stake in the combined business.
Mr Greidinger will take the helm from Steve Wiener, the founder of Cineworld who recently announced his intention to step down as chief executive after an industry career spanning 44 years.
He was previously managing director of Warner Bros Europe before starting his own business in 1995.