The acquired business is involved in the production of generic prescription and over-the-counter products for both branded and generic companies in the US, with a turnover of $43m last year.
Along with the deal comes BASF's manufacturing facility in Shreveport, Louisiana, as well as customer contracts - including a tolling and supply agreement - in addition to related abbreviated new drug applications (ANDAs), NDAs and trademarks.
The acquired facility employs 150 people and manufactures solid, semi-solid and liquid dosage forms.
No financial terms of the transaction were revealed, although Dr Reddy's did say that it would be funding the acquisition using "internal cash reserves or other committed credit facilities".
It is expected that the deal will be closed in the first quarter of fiscal year 2008-09.
Satish Reddy, managing director and chief operating officer of Dr Reddy's said that the company is "committed to building a leading global generics business over the next few years".
"The acquisition of BASF's finished dosage manufacturing facility in the US will enable us to strengthen our supply chain for North America and provide a strong platform for pursuing additional growth opportunities".
He also said that as the company "drives significant growth in our key markets", it will continue to expand its supply chain network into these markets "to enable us to respond to local market needs as well as provide competitive solutions to our customers globally".
Mark Hartman, president of North America Generics, Dr Reddy's, said that the acquisition also provides the firm with an "additional platform to further expand our portfolio of prescription generics, OTC capabilities and product portfolio and the ability to supply generic products to US government agencies".
Merger and acquisition activity in the pharma industry involving Indian players has been recently becoming more commonplace as the country's large firms begin to push hard for a more global presence.
Dr Reddy's, who is a dominant player in the Indian market place, has been particularly aggressive in its expansion plans of late.
Only last month the company revealed it is boosting its contract manufacturing business with the purchase of US firm Dow Chemical's small molecules business.
The acquired unit operates out of Dowpharma's UK sites at Mirfield and Cambridge.
Together they employ 80 staff and are said to be worth $25m. No financial terms of the deal were disclosed.
In addition to gaining the sites along with their customer contracts, products, process technologies, intellectual property and trademarks, Dr Reddy's also obtained a non-exclusive license to Dow's P f enex Expression Technology for biocatalysis development.
Commenting at the time of the deal, Reddy said: " The proprietary chiral and biocatalysis technology at the Cambridge site and the scale-up capability in the Mirfield site will add significant value to the company ."
" This acquisition will also bring strengths in industrial synthesis of complex prostaglandins and carbohydrate chemistry ."
It was also reported that the additional capabilities in the firm's custom pharmaceutical services business will also help the company " partly offset its fluctuating earnings from selling generic drugs in the US and Europe ".