Sumitomo Mitsui, Japan's second-biggest lender by assets, will also provide a $1.65 billion revolving credit facility and a $250 million subordinated loan to support the lending capabilities at Jefferies.
A 4.9% equity stake in Jefferies would be valued at $386 million based on the firm's Tuesday closing price at $31.92.
At last check shares of Jefferies, New York, were trading up 7.8% at $34.42. They have traded on Wednesday up as much as 12% at a 52-week high $35.69.
The equity investment is subject to U.S. antitrust clearance, the firms said.
The move will strengthen Jefferies's investment banking and capital markets capabilities, Jefferies Chief Executive Rich Handler said in a statement. Jefferies sees the investment as starting a long-term relationship with Sumitomo Mitsui, he said.
The move is part of SMFG's effort to create a foothold in the U.S., according to Reuters. Sumitomo Mitsui's SMBC Nikko Securities has a small presence in the country.
Mitsubishi UFJ Financial Group, the firm's bigger rival, invested $9 billion in Morgan Stanley (MS) in 2008 and owns about 20% of the Wall Street investment bank.
Sumitomo Mitsui is also expanding its presence in other areas. Earlier this month Mitsui said it planned to buy a 74.9% stake in Fullerton India for $2 billion.