The project, which will include the construction of a 9-mile, 24-inch diameter pipeline, will be 50/50 owned by the two companies.
Magellan president and chief executive officer Michael Mears said: "This connection would provide our customers with additional supply options for the Houston Gulf Coast refining region, with access to crude oil from the Cushing storage hub."
Magellan will be responsible for construction and operation of the $50m pipeline project, which is scheduled to be operational by late 2016.
The project will also enables access for the Keystone and Marketlink shippers of TransCanada to Magellan’s Houston and Texas City crude oil distribution system.
TransCanada president and chief executive officer Russ Girling said: "TransCanada is committed to developing energy infrastructure solutions for our customers in Canada and the U.S., and this project would allow us to directly connect to key refineries in the Houston and Texas City area.
"This is another great example of a project that would help to bolster North American energy security and independence."
TransCanada is scheduled to complete the construction of Houston tank terminal in 2015.
Magellan is also considering development of additional infrastructure at its East Houston terminal in order to accommodate movements from the new pipeline.
