Source: BBC
Intel will pay $7.68bn (£5bn) in cash.
Under the terms of the deal, Intel said it would pay $48 per share in cash for McAfee, almost 60% higher than its closing price on Wednesday.
McAfee, one of the world's biggest security technology companies, should help Intel protect its microprocessors from computing threats, such as malicious software.
The deal is likely to slightly reduce Intel's net earnings in the first year.
Intel has recognised that online security is not just about a few hacked bank accounts, stolen company secrets or a lone PC kept virus-free.
These days the internet reaches nearly everywhere: from smartphones to the power grid, your television to the transport system. Online threats now pose a systemic risk.
Microsoft recently launched its own suite of "Security Essentials" to keep computers safe. Apple says it has built security into its very system. Intel's deal with McAfee is yet another attempt to ensure that consumers don't lose trust in our interconnected world.
But Intel will take it one step further. The McAfee deal will see the integration of security into hardware, into the chips powering much of our computer-driven world. It also bolsters Intel's attempts to become more than a chip maker as it develops its own consumer devices and offering of IT services.
An Intel company statement said that the acquisition reflected that security was now a fundamental component of online computing.
It added that today's security approach did not fully address the billions of new internet-ready devices, including mobile and wireless devices, TVs, cars, medical devices and cash machines.
The president and chief executive of Intel, Paul Otellini, said in the past, energy efficiency and connectivity had defined computing requirements.
In future security would become the "third pillar" that people demanded, he said.
McAfee's president and chief executive, Dave DeWalt, said cyber attacks were a growing menace.
He said: "The cyber threat landscape has changed dramatically over the past few years with millions of new threats appearing every month."
Both boards of directors have unanimously approved the deal, but the deal still requires McAfee shareholder approval and regulatory clearances.
McAfee, also based in Santa Clara, is one of the world's largest security technology companies with about $2bn in revenue last year.