The deal brings together two highly complementary companies, FireEye said in a statement.
FireEye pioneered the use of virtual machine technology in security, while Mandiant specialises in endpoint security, incident response, and remediation.
Under the terms of the acquisition, FireEye will issue an aggregate of 21.5 million shares and options with a current value of about $900m to buy shares of FireEye stock.
In addition, it will pay approximately $106.5m of net cash in the transaction to the former Mandiant security holders and certain performance-based retention equity incentives.
Mandiant shot to prominence in February 2013 when it published a report that said a secretive branch of China's military had stolen data from at least 141 organisations around the world.
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FireEye said the acquisition, which closed on 30 December 2013, recognises the ever-increasing intensity of cyber attacks and follows almost two years of collaboration.
The company believes the deal will create a security company “with the ability to find and stop attacks at every stage of the attack life cycle”.
FireEye shares rose 24% in after-hours trading in New York as news of the deal was made public only after the close of the markets, according to the BBC.
Silicon Valley-based FireEye went public in 2013, and currently has a market valuation of more than $5bn, reports the International Business Times.
“In my conversations with customers I have heard many of you express a desire to simplify the number of vendors and service providers you work with to protect yourself from advanced threats,” said David DeWalt, chief executive officer of FireEye.
“We believe that by joining forces with Mandiant we have taken a significant step towards that goal,” he said in a statement.
DeWalt said that together, the size and global reach of FireEye and Mandiant will enable faster innovation to deliver unmatched and comprehensive security.
Kevin Mandia, Mandiant's founder and chief executive officer, was appointed as the chief operating officer of FireEye prior to the acquisition.