Revenue generated by click-throughs on sponsored advertising links would be shared between the two. Other financial terms of the agreements have not been disclosed.
The video sharing site will be seen as a rival to YouTube, which Google recently bought for $1.65 billion (840 million pounds), despite using some of its technology.
BSkyB added that it was also looking at launching a product which would enable users to make calls over the internet -- similar to service offered by Skype.
As its first global partnership of the kind, Google chairman and chief executive, Eric Schmidt, told journalists the deal was a milestone for the California company.
"I've been waiting for this for a while," he said at a meeting in London, adding that the significance was boosted as it marked the first time Google had sold the use of the back-end technology of YouTube and GMail.
He said that Google was planning similar deals with other large media firms and content providers. "If we can get this structure right over the next few months and it rolls out, then it becomes the index case for every other country and every other operator."
Murdoch told the meeting that as internet and television services start to blend into one, the prize for firms able to harness the advertising potential was huge.
"People say you've got your internet stuff and your TV stuff. The truth is that in a connected marketplace all media is connected."
"All media owners -- internet, television or whatever it is -- have a huge amount to play for in delivering the most efficient marketing and advertising solution that there can be," he added.
The boundaries between telecoms and media firms are becoming increasingly blurred as companies look to satisfy the growing public appetite for something which combines TV-like content with the on-demand convenience and control offered by the internet.
Earlier this week former telecommunications monopoly BT Group Plc
