The video-sharing site has agreed to pay a flat fee in exchange for licensing the library of music.
The MCPS-PRS will split the money between the 50,000 composers, songwriters and publishers whom it represents, based on an estimate of music usage.
The deal will allow YouTube users to incorporate any of the 10 million copyrighted British songs as part of the videos they create.
Neither side revealed any further terms of the deal or the amount of the flat fee.
"We are delighted to have concluded this deal with YouTube and to be the first collecting society outside the US to do so," said Steve Porter, chief executive of the MCPS-PRS Alliance.
"Whether it is music videos, user uploads or other audio visual content, our agreement will allow our 50,000 songwriter, composer and music publisher members to be paid when their creative talents are being enjoyed on YouTube's service."
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