They did not disclose the value of the transaction, which makes Geely Volvo's largest owner by capital and the second biggest by voting rights after investment firm Industrivarden.
By bringing the two Volvos closer together again, Chinese vehicle giant Geely is betting they do.
Geely has surprised the automotive world with its resurrection of Volvo Cars since its acquisition of the Swedish carmaker in 2010.
"Given our experience with Volvo Car Group, we recognise and value the proud Scandinavian history and culture, leading market positions, breakthrough technologies and environmental capabilities of AB Volvo".More news: Cardinals coach Bruce Arians: 'Nothing decided' on future with Arizona
Li said Geely would support Volvo management's current strategy. Other automakers in Geely's portfolio include Malaysia's Proton and British sports vehicle maker Lotus.
Volvo's vehicle and truck business were separated in 1999 when the former was sold to Ford. Reuters reports that Volvo Cars brought in $1.26 billion in the first three quarters of 2017, compared to just $193 million in 2011, the first full year of Geely's ownership.
Christer Gardell, co-founder of Cevian, said that the transaction gives AB Volvo a "large and committed shareholder", and with one with expertise in strategically important areas, alluding to the Chinese market and its expertise in areas including electric cars.
Geely also launched a new brand, Lynk & Co., in 2016.