World Rugby would not specify the size of the league, or when it would start.
As well as professional men's and women's 15-a-side leagues, a national sevens programme will be set up, the two said in separate statements. The money will be spent over 10 years.
But rugby has heavy handicaps to overcome in the world's most populous country.
Fewer than 80,000 Chinese play the sport and it is far less popular among spectators than football or basketball. Its Chinese name translates literally as "English-style olive ball".
World Rugby would not specify the size of the league, or when it would start, when contacted by AFP.
The chief executive of Alibaba's sporting arm Alisports, Zhang Dazhong, said the game had "undoubted potential" to become a "mass-participation sport" in China.
The two bodies plan to cultivate one million new players through school programs and train 30,000 coaches and 15,000 match officials in the next five years, according to the statements.
"We will work tirelessly to promote the development of rugby in China," Zhang added.
In April, when Alibaba unveiled a tie-up with World Rugby to increase the game's visibility through its internet video platforms, World Rugby CEO Brett Gosper told AFP that China has ambitions to host the Rugby World Cup.
Gosper said in a statement on Wednesday that World Rugby's "strategic mission is to grow the global rugby family. China is central to that mission".
Many firms in China are investing in sports, anticipating a massive growth in leisure industries as China's economy rebalances towards consumption.
Rugby has increased its profile in Asia thanks to its inclusion in this year's Olympics and the upcoming 2019 World Cup in Japan, as well as the growing world sevens series.
Alibaba has obtained the 2016-2017 broadcasting rights to show international matches including the southern hemisphere's Rugby Championship and Europe's Six Nations on its online video platform.
The Hangzhou-based company is investing heavily in the sports industry and has a 38 percent stake in the reigning Chinese football champions, Guangzhou Evergrande.
Alisports has also signed deals to stream NFL American football in China and sponsor FIFA's Club World Cup. It has partnerships with world amateur boxing body AIBA and basketball's FIBA.