The two bodies have signed a Memorandum of Understanding which sets out a shared agenda for the future of Welsh public services.
The two say their statement signals a commitment by local government and the private sector to work together to find efficient, innovative and sustainable ways to best deliver services in Wales.
Local government in Wales spends more than£2.4bn within the private and third sectors, and the aim of the collaboration is to improve procurement processes to deliver the best service and value-for-money.
The memorandum sets out an agreement for working in partnership, shared principles and proposed joint action.
Cllr John Davies, leader of the WLGA, said, “Local government is the natural leader of local public service reform, and business and local government priorities are in fact already aligned in many areas such as transport, skills, delivery of public services and tackling joblessness.
“We are committed to working together to develop joint solutions for new ways of working to improve affordability, sustainability and inter-authority collaboration.”
David Rosser, director of CBI Wales, said, “Both organisations recognise and value to input of the public sector workforce to the Welsh economy and we look forward to taking our agreement forward to deliver real benefits for the communities and citizens of Wales.”