Funded by a $40 million investment from Microsoft Corp., the University of Washington and China’s elite Tsinghua University will launch a new program in Seattle in the fall of 2016 to focus on technology and design innovation—a cooperative move between nations for whom technology has been a sore point in recent years.

The “Global Innovation Exchange” will represent the first physical presence by a Chinese research university on U.S. soil, according to the partners, and address the role of technology in areas including climate...