The CK Birla group, the owners of Hindustan Motors, have sold the car brand for 800 million rupees to the French auto makers, a company spokesman confirmed to AFP on Sunday.
Hindustan Motors, India's oldest car maker, stopped production of the Ambassador in 2014 citing debt and lack of demand for the vehicle which was designed on Britain's long-defunct Morris Oxford.
"We have sold it for just 800 million rupees but we had already stopped production at the plant nearly three years back. The plant has been closed since," the official said.
Last month, the Birla group had signed a separate agreement with Peugeot to set up two joint ventures with production capacity initially estimated at 100,000 vehicles per year by 2020.
The PSA Group, which makes Peugeot and Citroen cars, said at the time it had not yet decided which model it will build in India.
The curvy Ambassador once ruled India's roads and for years was the only car driven by politicians and senior government officials.
But the car was muscled out over the years by the entry of more modern vehicles, particularly SUVs increasingly favoured by senior bureaucrats.
The car still remains popular with some taxi drivers and politicians and tourists looking for nostalgia.
The PSA group was among the first foreign car manufacturers to make a foray into India in the Nineties after the government opened up investment.
But after a fall-out with their local partners, the company withdrew from India in 1997.
