The new partnership was announced in San Francisco Monday during the annual Society Of Toxicology Expo at the Moscone Center.
The EPA says the money will go to the agency's ToxCast program. The project compares animal-free chemical testing methods against data collected from 30 years of animal tests.
"This is a great partnership, together I think we will be able to advance this computational model and get to a place where we no longer need to test on animals," said Jared Blumenfeld, the EPA's regional administrator.
The money will also be used to fund new research into 10 chemicals used in cosmetics. Right now, L'Oreal and other European cosmetics companies are developing testing alternatives for wrinkle creams and lipsticks to comply with European Union laws, which require a phase out of animal skin testing by 2013.