The Denver company's stock at last check rose 10% to $76.99.
CNBC reported that VF would make an additional payment of as much as $300 million if Supreme meets certain milestones.
Supreme's current investors, the private-equity firms Carlyle Group of Washington and Goode Partners of New York, are selling their stakes in Supreme, which produces skateboarding T-shirts, hats and sweatshirts.
The streetwear company sells apparel, accessories and footwear internationally through direct-to-consumer channels, primarily digital.
The transaction is expected to close late this year, subject to conditions including regulatory clearance.
Acquiring Supreme is in line with VF's strategy to build its brand portfolio in line with "the total addressable market opportunities we see driving the apparel and footwear sector," the company's chairman, president and chief executive, Steve Rendle, said in a statement.
Supreme Founder James Jebbia said the partnership would enable Supreme to "maintain our unique culture and independence while allowing us to grow on the same path we’ve been on since 1994.”
Jebbia and Supreme's senior managers will remain with the company in New York.
The deal is expected to contribute at least $500 million of revenue and adjusted earnings per share of 20 cents to VF in fiscal 2022.
Morgan Stanley provided a fairness opinion in connection with the transaction, and Davis Polk & Wardwell served as legal adviser, VF said.