he Oscar-winning green ogre Shrek will be appearing on McDonald's Happy Meals thanks to a new partnership with DreamWorks Animation, the companies said.

The two-year worldwide marketing and promotional deal is set to begin in 2007 and will snag Shrek away from rival Burger King, which had retained marketing rights to the first two smash-hit animated films.

RELATED: People Are Drawing Shrek from Memory and the Results Are Amazing

"Our partnership with McDonald's will help us expand our global outreach," Jeffrey Katzenberg, DreamWorks Animation's chief executive officer, said in a conference call with reporters. "McDonald's is one of the greatest companies and most recognized brands anywhere in the world."

Expanding global marketing is critical for US studios like DreamWorks, which rely on ticket sales in Asia and Europe to bolster lagging box office returns at home.

The partnership will also help both companies boost their sales in the lucrative children's market. Cross-marketing aimed at children encourages parents to spend more money and also aids in locking in future customers.

McDonald's would not say how the deal will affect its 10-year partnership with Disney, which is set to expire at the end of 2006.

However, the agreement is non-exclusive and will allow McDonald's to partner with other studios.

"Some of our most successful Happy Meals were Disney properties, and we continue to work with them on remaining products," Mike Roberts, McDonald's president and chief operating officer, said in the conference call.

McDonald's and Disney are currently negotiating a possible extension of the partnership, which includes both marketing promotions and the placement of McDonald's restaurants at Disney theme parks, Roberts added.

DreamWorks has agreed to use its award-winning animation facilities to help McDonald's produce commercials, some of which would have Ronald McDonald interact with DreamWorks characters such as Shrek.

The iconic clown will not be appearing in DreamWorks films, Katzenberg said.

"We would be integrating our characters into Ronald's world," he said.

The studio will also use its characters to help promote McDonald's "balanced active lifestyles" program and could get involved in a multitude of marketing programs, including ads aimed at the Internet and merchandising.

The deal gives McDonald's global rights to four DreamWorks films but does not preclude the studio from partnering with businesses other than restaurants for additional promotional activities.

It is part of a larger strategy by McDonald's to expand its youth customer base. After a period of sluggish growth, McDonald's has boosted sales to the tune of an additional two million customers a day over the past two years. And its "I'm lovin' it" campaign uses music, fashion, sports and entertainment to appeal to a younger audience.

Dont't forget to also check out: Shrek the Third, Shrek Goes Forth