The UK, US and Australia will work together "keeping our oceans free" with a new generation of nuclear-powered attack submarines, Rishi Sunak said.
The Prime Minister said the Aukus partnership would deliver "one of the most advanced" submarines "the world has ever known", creating thousands of jobs in British shipyards.
The new SSN-Aukus submarines will be in operation for the Royal Navy by the late 2030s under the plan, and will also give Australia its first nuclear-powered capability as it seeks to counter Chinese activities in the Pacific.
The boats will replace the UK's seven Astute-class subs and while there is no confirmed number of how many will be ordered, the size of the hunter-killer fleet could double, Royal Navy insiders said.
Mr Sunak met US President Joe Biden and Australian counterpart Anthony Albanese in San Diego to announce the next stage of the Aukus plan.
The Prime Minister said it was "the most significant multilateral defence partnership in generations".
"Aukus matches our enduring commitment to freedom and democracy with the most advanced military, scientific, and technological capability," he said.
"For the first time ever, it will mean three fleets of submarines working together across both the Atlantic and Pacific, keeping our oceans free, open, and prosperous for decades to come."
The Prime Minister said the UK, US and Australia were "three allies who have stood shoulder to shoulder together for more than a century".
He added: "Three peoples who have shed blood together in defence of our shared values. And three democracies that are coming together again to fulfil that higher purpose of maintaining freedom, peace, and security now and for generations to come."
The UK's submarines will mainly be built by BAE Systems at Barrow-in-Furness, Cumbria, and Rolls-Royce, with the US sharing sensitive technology for the project.
Australia's boats will be built in South Australia, using some components manufactured in the UK, and will be in service in the early 2040s.
As part of the agreement, Australia will buy US Virginia-class submarines in the 2030s as a stop-gap measure until the new vessels are operational.
The new submarines will also incorporate US technology.
Rishi Sunak said: "The Aukus partnership, and the submarines we are building in British shipyards, are a tangible demonstration of our commitment to global security.
"This partnership was founded on the bedrock of our shared values and resolute focus on upholding stability in the Indo-Pacific and beyond.
"And I am hugely pleased that the plans we have announced today will see pioneering British design expertise protect our people and our allies for generations to come."
The Aukus partnership was announced in 2021 as Australia sought to respond to China's actions in the Pacific.
The latest stage comes as the UK published its updated integrated review of foreign and security policy, which highlights China's "more aggressive stance".
The Aukus deal caused a diplomatic rift with France, which had expected to supply diesel-powered submarines to the Canberra government.
The £5bn extra for defence announced by Mr Sunak will partly help develop the next phase of the Aukus programme.
This will be followed by sustained funding over the next decade and will build on the £2bn invested last year in the UK's Dreadnought-class submarine programme.
The Aukus programme will result in closer collaboration between the three nations.
Beginning in 2023, Australian military and civilian personnel will embed with the US Navy and Royal Navy, and in the two countries' industrial bases to accelerate the training of Australian personnel.
The US plans to increase port visits by nuclear-powered submarines to Australia this year, with the United Kingdom increasing visits in 2026.
From 2027, UK and US boats could be deployed on "forward rotation" to Australia to help develop training and expertise.
The three nations insisted that the deal did not increase the risk of nuclear proliferation.
The vessels will carry conventional weapons and the nuclear reactors will be sealed shut and not require refuelling in their lifetimes.