The deal includes a development fund for Baron Cohen to generate projects in the United Kingdom. Todd Schulman will head Four By Two Films.
Paramount's announcement follows the comic actor's red carpet stunt at the Oscars. Baron Cohen, who co-starred in "Hugo" for the studio, appeared in character for "The Dictator" and doused Ryan Seacrest with material he said was ashes from Kim Jong-il's urn. Paramount will release "The Dictator" May 11.
That movie is about "a dictator who risks his life to ensure that democracy would never come to the country he so lovingly oppressed."
"Sacha is a comic genius," Brad Grey, chairman and CEO of Paramount Pictures, said in a statement. "A wildly talented writer, actor and filmmaker. Beyond that, he is the rare global comedy star."
Baron Cohen was nominated for an Academy Award for writing the 2006 "Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan." He followed that up with the 2009 "Bruno."