Under the research-and-development deal, Sunnyvale-based AMD will develop plans for student computers, teacher computers and classroom servers.
Terms of the agreement with China Basic Education Software Co. were not disclosed. The deal must be approved by regulators.
The business opportunity could be enormous for AMD, which has been struggling with weak demand for its Athlon and Duron microprocessors during the economic downturn.
"We do feel like this is a very positive step for the company," AMD spokesman Dan Pickens said.
China's Ministry of Education has mandated that all schools be connected by 2010 to the China Education and Research Network, a national academic network.
China has about 215 million students, 10 million teachers, 4.4 million classrooms and 680,000 schools nationwide, Pickens said.
Because the machines have yet to be developed, it was not clear whether they will be able to access the global Internet. China has encouraged its use in education and commerce but has restricted it as a forum for political discussions.
Pickens declined to say whether the agreement includes any limits built into the hardware.
Beijing-based China Basic Software Education Co. was formed in February 2001 by the Shenhua Holdings Co. Ltd., the Ministry of Education's National Center for Curriculum and Text and Beijing Normal University.
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