The neighbours have reached an agreement that will see either club given first refusal on availability for new signings and more loans from Town to the Bucks.
The clubs say the agreement will benefit and strengthen both Montgomery Waters Meadow and New Bucks Head academies moving forward.
League One Shrewsbury signed striker Daniel Udoh, last season's 16-goal top scorer, from National League North Telford in 2019. The likes of former academy players Ryan Barnett and Ryan Sears have spent time on loan at Telford in recent years and it is understood another academy graduate was close to joining the Bucks on loan earlier this year.
Town academy director David Longwell said: "Since I came in here, we've developed a really good relationship with Telford for a variety of different reasons.
"After getting to know the guys there and what they're doing and playing their teams, we saw an opportunity for us to work together.
"From our own point of view, it opens up another opportunity for our kids and we've had a lot of kids who have come from Telford and the surrounding areas who are now within our set-up."
Longwell explained how Udoh's younger brother is part of Town's under-13s set-up having joined the club from Telford.
Telford continue to help to push local non-league talent through to the professional game, a recent example Brad Bood, who impressed on trial at Premier League Brentford earlier in the season.
The clubs will work together to raise the profile of their academies and ensure trial and development processes are aligned to help give local talent the biggest opportunity to progress.
This will include collaborative trial and coaching sessions.
The agreement also states they will notify each other on interest from elsewhere in players from either club and offer first refusal on the signings.
There will be regular fixtures between the two clubs at different age groups, including the annual first-team summer friendly agreement.
AFC Telford football operations manager Luke Shelley said: "I am delighted that we have created an academy partnership with Shrewsbury Town which will give players and coaches at both clubs an opportunity to progress their careers in the game.
"Over many seasons now, we have seen several academy players move between the two clubs permanently and on loan."
Longwell, who is now part of Steve Cotterill's first-team staff, added: "On the other side of things – because it's got to benefit both clubs – there are also opportunities for us to send players on loan to Telford to try and create that relationship with them moving forward.
"There are a lot of positives with that and I've got to credit Luke at Telford, who I've been dealing with on a regular basis; I think he and Andy (Pryce, chairman) have done a great job and I think it's only going to be positive for the future."