The cash would provide a welcome infusion for JetBlue, which has been struggling. Shares of the New York-based carrier rose more than 14 percent on the news.
The move comes as the euro has risen significantly, putting more shine on U.S. companies for European buyers.
JetBlue CEO Dave Barger called the deal a "significant endorsement of JetBlue's franchise from one of the most respected leaders in global aviation."
He said that the agreement "reaffirms our belief in JetBlue's disciplined growth plan and will also improve our balance sheet and give us greater financial flexibility as we move into 2008."
In a brief statement, Lufthansa said it would acquire about 42 million newly issued shares from JetBlue for $7.27 per share, a 16 percent premium to Wednesday's closing price.
The terms of the deal also call for a Lufthansa nominee to be appointed to JetBlue's board of directors once the deal is concluded. JetBlue said that the deal does not require approval from its shareholders.
The deal also provides that the carriers would seek "an operation cooperation."
"We are very pleased to become an investor in JetBlue," said Lufthansa Chief Executive Wolfgang Mayrhuber. "Our investment reflects the confidence we have in JetBlue's quality, growth potential and management team. This investment presents Lufthansa with a compelling opportunity to invest in the U.S. point-to-point carrier market as the industry continues to evolve. The transaction links two airlines with international reputations for quality, innovation and a service culture."
Selling a stake to Lufthansa would benefit both airlines by bringing each new sources of traffic, said Ray Neidl, an analyst at Calyon Securities in New York.
"It's probably better for Lufthansa than JetBlue," Neidl said.
But it would also put Lufthansa in the driver's seat for any potential longer-term takeover of JetBlue. Lufthansa is barred from such a takeover under current laws restricting foreign ownership of domestic airlines to 25 percent, but there have been attempts over the years to overturn that law, Neidl said.http://money.cnn.com