SoftBank, along with other investors, is also pumping in $210 million (about Rs 1,260 crore) in taxi services firm Ola.
The investments come a day after SoftBank announced its plans to invest a whopping $10 billion in India in coming years, making the country its "top most priority".
This is the largest investment made by a single investor in an e-commerce company in India. Other existing investors have also participated in this round of investment but the company declined to disclose the amount.
SoftBank, run by Japan's richest businessman Masayoshi Son, seeks to tap the growing online market in India with this funding round.
Snapdeal will use the investments in expanding its chain of fulfilment centres and make acquisitions in the coming few months, specifically in the area of mobile technology.
The city-based e-commerce firm, which has so far raised about USD 1 billion this year, is already eyeing 3-4 firms, especially those in mobile technology.
Its co-founder Kunal Bahl told PTI: "We are looking at acquisition opportunities across sizes, ranging from less than USD 1 million to USD 100 million."
Besides, Snapdeal will open a R&D centre in Bangalore with 500 engineers in the next two weeks to work on platform innovation and areas like mobility, payments and supply chain.
SoftBank said it will become New Delhi-based Snapdeal's biggest investor but did not specify the exact quantum of stake it has bought in India's third-biggest online marketplace.
In a statement today, Ola (formerly Olacabs) said it has signed "a definitive agreement to raise USD 210 million (about Rs 1,260 crore) from SoftBank Internet and Media, Inc. (SMIC) and existing investors Tiger Global, Matrix Partners India and Steadview Capital."
SoftBank has also invested in mobile ad firm InMobi and has a joint venture with Bharti Enterprises in messaging app Hike.
"India has the third-largest Internet user base in the world, but a relatively small online market currently. This situation means India has, with better, faster and cheaper Internet access, a big growth potential," SoftBank Corp Vice Chairman and CEO of SoftBank Internet and Media, Inc (SIMI) Nikesh Arora said.
Arora will join the board of Snapdeal as part of the strategic investment.
Apart from the two present deals, Arora has also overseen SoftBank's USD 250 million investment in Hollywood movie studio Legendary Entertainment.
He was earlier the Chief Business Officer of US-based tech giant Google.
Founded in 2010, Snapdeal has over 25 million registered users and more than 50,000 business sellers.
With mobile commerce fast gaining pace in the country, the city-based firm also plans to set up an incubation centre to hone and harness start-up businesses in mobile technology space within the next six months.
Through this strategic investment and partnership with Snapdeal, the SoftBank Group aims to further strengthen its presence in India and leverage synergies with its network of Internet companies around the world, Snapdeal said in a statement.
"We believe India is at a turning point in its development and have confidence that India will grow strongly over the next decade. As part of this belief, we intend to deploy significant capital in India over the next few years to support development of the market," Son said.
SoftBank has pledged an investment of USD 10 billion (over Rs 60,000 crore) in India's IT and communications space, one of the biggest investment commitments from a Japanese firm after Prime Minister Narendra Modi's visit to that country.
Kunal Bahl, co-founder and CEO of Snapdeal, said with the support of SoftBank, the company is confident of further strengthening "our promise to consumers and create life changing experiences for 1 million small businesses in India."
Earlier this year, Snapdeal had raised USD 133.77 million in a round led by eBay and USD 105 million from institutional investors, including Temasek, Myriad, Tybourne, Blackrock Inc. and Premji Invest.
Tata Sons Chairman Emeritus Ratan Tata also made a personal investment into the company.
Morrison & Forester LLP acted as legal advisor to SoftBank, with Kochhar & Co. advising SoftBank on India law matters.
In July this year, Snapdeal rival Flipkart had announced a USD 1 billion funding, the largest to date in the fledgling e-commerce sector from Singapore's sovereign wealth fund, GIC, as well as existing investors including Tiger Global Management, Naspers, Accel Partners and Morgan Stanley Investment Management.
A day later, world's largest e-tailer Amazon said it will pump in USD 2 billion to bolster business in India.
A report by consulting firm Technopak pegs the USD 2.3 billion e-tailing market to reach USD 32 billion by 2020.
Another report by consultancy firm PwC and industry body Assocham suggests that e-commerce firms are expected to spend up to USD 1.9 billion by 2017-2020 on infrastructure, logistics and warehousing.