The two German automotive firms will jointly develop the software and algorithmic systems required for SAE level four and level five autonomous vehicles, which can drive themselves in urban and extra-urban environments.
In launching the initiative, the companies said they aim to have this technology on "city streets by the start of the next decade", and "ready for production as early as possible".
They note their self-driving vehicle technology could be used for automated car sharing and taxi services. In an example they cite, you could summon a vehicle, within a pre-defined urban area, via a smartphone app.
The car would then drive itself autonomously to your current location. You would then either drive yourself or let the car drive you to your destination. From there, the car could either return to its home base or go directly to its next client.
Daimler and Bosch say autonomous vehicles will "improve urban traffic flows, enhance road safety, and provide an important building block for the traffic of the future".
In addition to this, it would improve the mobility options available to those without a driver's licence.