Alibaba will spin off its online travel business, previously run as Taobao Travel, to create an independent brand Alitrip, the company said in a statement, adding that the new platform will be an "integral" part of the group.
The company sees huge "unmet demand" for travel services in China, it said.
"Alitrip will enrich our ecosystem and create value for users by providing them with high-quality service and an array of new functions," said Alitrip general manager Li Shaohua.
China already has two major online travel agencies, Ctrip and Elong.
Headquartered in the eastern city of Hangzhou, Alibaba operates China's most popular online shopping platform, Taobao, which is estimated to hold more than 90 percent of the online market for consumer-to-consumer transactions.
Its ambitions have grown beyond e-commerce and extended to sectors including entertainment and logistics in a frenzy of deals before the company's listing on the New York Stock Exchange in September.
Alitrip currently has more than 10,000 merchants offering services ranging from hotel bookings to visa applications, according to the statement, including Hong Kong-based Cathay Pacific Airlines and hotel booking site Agoda.
China's online travel market jumped 20 percent year-on-year in the third quarter to reach 72.6 billion yuan ($11.9 billion) in transaction value, data from consulting firm iResearch showed.