Under the scheme, Virgin Media customers can pay a monthly fee to stream and download songs from the Universal back catalogue.
The telco also said it is in talks with other major and independent record labels in the UK to secure access to their catalogues in time for the service launch.
Commenting on the announcement, Virgin Media's chief executive Neil Berkett claimed: "In terms of both convenience and value, our new music service will be superior to anything that's available online today and provides a fair deal for both consumers and artists.
"There is no better example of Virgin Media's commitment to harnessing digital technology to give customers what they want, when they want and how they want."
Universal Music Group chairman and chief executive Lucian Grainge added: "Britain has a world-class reputation for artists and music.
"Now British consumers will have access to a world-class digital music service. I believe this puts all of us at the forefront of a new era."
As part of the collaboration, Virgin Media will also work to reduce the "unauthorised distribution" of Universal's repertoire over its network.
This will include strategies to "educate file sharers about online piracy and raise awareness of legal alternatives".
However, the firm pointed out that "no customers will be permanently disconnected" as part of this initiative.
Last month, it was reported that Sky had partnered with Universal for its planned Sky Songs unlimited music service.