US customers of Apple's online music store iTunes are now able to fund their purchases using PayPal's virtual wallet.
The agreement between the two firms represents a further step in PayPal's attempts to move beyond the online auction business and diversify into new markets. About 70% of PayPal transactions are made at parent auction site eBay.
The iTunes Music Store features more than a million songs from major music companies and 600 independent labels.
Todd Pearson, general manager of PayPal's merchant services, comments: "PayPal's virtual wallet offers iTunes customers the convenience of paying in the way they prefer."
As an added incentive, the first 500,000 customers to open a new iTunes account in the US using PayPal as their form of payment, will receive five free songs.