The Virgin transport, entertainment and communications group has signed an agreement with pioneering aviation designer Burt Rutan to build an aircraft based on Rutan's SpaceShipOne vessel, Branson said.
SpaceShipOne cracked the barrier to manned commercial space flight in June by flying 328,491 feet, or about 62 miles, above Earth — about 400 feet above the distance scientists widely consider to be the boundary of space. The flight lasted 90 minutes.
SpaceShipOne's effort was bankrolled by billionaire Microsoft co-founder Paul Allen.
Virgin said its agreement to license technology from Allen's company, Mohave Aerospace Ventures, could be worth up to $25 million over the next 15 years, depending on the number of spaceships built by Virgin.
The company said it planned to begin construction of the first vessel, VSS Enterprise, next year, and would invest about $108 million in spaceships and ground infrastructure for the venture.
"Virgin has been in talks with Paul Allen and Burt throughout this year and in the early hours of Saturday signed a historical deal to license SpaceShipOne's technology to build the world's first private spaceship to go into commercial operating service," Branson told a news conference.
The new service will be called Virgin Galactic and expects to fly 3,000 new astronauts in its first five years. Fares will start at $208,000 for a suborbital flight, including three days' training.
Branson said the business would "allow every country in the world to have their own astronauts rather than the privileged few."
"Virgin Galactic will be run as a business, but a business with the sole purpose of making space travel more and more affordable," Branson said.
"Those privileged space pioneers who can afford to take our first flights will not only have the most awesome experience of their lives, but by stepping up to the plate first they will bring the dream of space travel for many millions closer to reality."
Virgin Group, which began as a record label, operates several airlines — British-based Virgin Atlantic and budget carriers Virgin Express in Europe and Virgin Blue in Australia — and plans to launch a low-budget U.S. carrier next year.