The merged entity will include more than 75 television channels, film assets and two streaming platforms.
It is poised to become a major player in the country's fast-growing entertainment industry, challenging rivals such as Walt Disney's Hotstar.
India has more than 900 million TV viewers and some 800 channels.
These channels offer a variety of shows ranging from sports, melodramas to reality television.
As per the merger, which was announced on Tuesday, the combined entity will be nearly 51% owned by Sony Pictures Networks India (SPNI). It will be headed by Zee's Chief Executive Officer Punit Goenka after a 90-day due diligence period.
Mr Goenka called the deal a "significant milestone".
"The combined company will create a comprehensive entertainment business, enabling us to serve our consumers with wider content choices across platforms," he said, according to an official release.