The deal will see Morgan Stanley receive around $500 million in cash and $1 billion worth of stock, giving the company a 9.4 per cent stake in Invesco.
It means Morgan Stanley will become the company's largest shareholder.
Invesco will take almost $120 billion worth of client assets from Morgan Stanley's investment operations as part of the agreement.
James Gorman, co-president of Morgan Stanley, said he was looking forward to Morgan Stanley's partnership with Invesco and that the prospects for Van Kampen were good.
"The combination of Invesco's strong and diversified product portfolio with Van Kampen's own product strengths and leading distribution capabilities will create a formidable new contender in the retail space," he added.
Morgan Stanley recently restarted making political donations following the repayment of its government bailout funds, reports Bloomberg.
By Claire Archer