Canada will contribute around 75% of the U.S.-based company's development costs and C$55.9 million (32.84 million pounds) for the project.
VBI Vaccines said last month that together with the National Research Council Canada it was investigating the vaccine candidate, VBI-2900, in preclinical trials.
As per the agreement, signed last week, the company's Ottawa-based unit is obligated to complete the vaccine development in or before the first quarter of 2022.
There are currently no approved vaccines for COVID-19, but around 38 vaccines are being tested in humans around the world.
(Reporting By Mrinalika Roy in Bengaluru; Editing by Maju Samuel)