The posthumous contract is said to include a new TV commercial featuring Jackson, while his image will appear on a number of special edition cans of the soft drink, reports TMZ.
Jackson had worked with the company on a number of occasions during his career, including an infamous 1984 commercial in which his hair caught on fire.
The singer received second-degree burns on his scalp during the incident, which is said to have been the main cause of his heavy addiction to pain relief medicine for the rest of his life.
However, Jackson worked with Pepsi for other campaigns after the incident, including commercials in 1988 and 1991.
The deal comes soon after the announcement that Jackson's Bad will be remixed by the likes of Skrillex and Diplo for a new Pepsi project.
A Michael Jackson estate spokesperson said: "We're here to market the Bad album and Pepsi is the most effective place to do it."
It was recently suggested that Jackson 5 may use a Michael Jackson hologram on a future world tour.
Watch Michael Jackson's 1988 Pepsi commercial below: