The partnership will result in the launch of a video-on-demand channel called Impact, which will wholly and solely cater exclusively to action films, TV shows and clips.
"I think it will grow into a nice little business," BBC quoted Jim Packer, co-president of MGM Worldwide Television, as saying.
He claimed that YouTube made up for the ideal partner with its 280 million monthly users.
"I think YouTube has something that a lot of sites don't have. They have a lot of people walking through their front door everyday. And if they are smart in how they grow this, YouTube should have a successful business also," said Packer.
There will be one more channel, which will feature episodes from the popular programme 'American Gladiators' from the 1980s and 1990s.
While downloading the videos won't cost a single penny on the viewer's pocket, but will contain advertising.
Though, the films will be available only in US in the beginning, but the service will be extended elsewhere once rights issues get cleared.
YouTube claimed the deal with MGM was the right thing to do, owing to the studio's commitment to deliver premium content online.
"YouTube is committed to helping our community of fans discover new content and reconnect with their all time favourite TV shows and movies," said Jordan Hoffner, director of content partnerships for the company.
He added: "By partnering with MGM, YouTube is strengthening its position as an entertainment destination where Hollywood studios can reach a global audience."
On YouTube's Impact channel one can watch clips from MGM classics such as Rocky, Ronin, Legally Blonde, and The Magnificent Seven.
And films, which will be featured on the channel, include Lone Wolfe McQuade and Bulletproof Monk, as well as those starring the actor Chuck Norris.
Also, the Bond movies represent a major franchise for MGM
"It's safe to say you won't see those blockbuster theatricals shortly after their release or after their TV window," admitted Mr Packer.
However, the users won't get to see any of the James Bond films playing on YouTube.
"They do very nicely on their own under existing licences and we are very protective of that content. There are plenty of other films we would like to expose," added Packer.
He also said that he did not expect to be the only studio to make these kinds of deals.
He revealed that plans are underway to launch another five to 10 channels, of which one would cater only to female viewers.
"We are in the process of figuring out a female-skewed brand. We could put up a number of say romantic clips from shows like Moonstruck and put up a number of key feature films and create a female targeted site that would get a much higher advertising rate," explained Packer.