Woolworths will become a mobile virtual network operator and resell Telstra's services.
A statement released by Telstra said the agreement would "initially be focused" on reselling services on Telstra's 3G network in the 850MHz and 2100MHz bands.
The supermarket chain previously sold services on the Optus network. However, in late 2013 it cancelled its agreement with the telco.
The Woolworths Mobile website remains online with details of the shut down.
Woolworths’ head of telco is Jason Hair. Hair has held the position at the retailer since January, according to his LinkedIn profile, after a two year stint Virgin Mobile in South Africa.
Hair said Woolworths would reveal more detail about its plans in coming weeks.
"This relationship is the first step for Woolworths on the road to delivering a straightforward, high quality and value-driven service for our customers," he said in a statement.
"We are very excited to be working with a leading Australian company like Woolworths," Telstra Wholesale Group Executive, Stuart Lee, said.
"We see this relationship as an important development in the continued evolution of Telstra’s wholesale business.
"Our wholesale product gives companies like Woolworths that want to operate as virtual network operators the network access and operating platform they need to offer mobile services direct to retail customers."
Telstra Wholesale reported revenue of $1.24 billion for the six months to 31 December, up 7.7 per cent from $1.16 billion in the corresponding period.
The change was largely driven "by an increase in NBN infrastructure payments to Telstra which have increased in line with the NBN rollout", the telco noted at the time. Telstra Wholesale's EBITDA contribution for the half was $1.15 billion.