Microsoft and Sony have formed a partnership on video games streaming, despite being fierce competitors.
It is expected Sony will use Microsoft’s Azure cloud service to host its upcoming PlayStation streaming service.
Microsoft has been trialling a streaming offer of its own, under its Xbox brand.
The firms said they would also work together on semiconductors and artificial intelligence applications.
"For many years, Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas,” said Kenichio Yoshida, Sony’s chief executive.
“I believe that our joint development of future cloud solutions will contribute greatly to the advancement of interactive content.”
Microsoft’s chief executive, Satya Nadella, said: "Sony has always been a leader in both entertainment and technology, and the collaboration we announced today builds on this history of innovation.”
The two companies have been bitter rivals in gaming since the launch of the first Xbox console in 2001.
But in its pursuit to compete with Amazon Web Services, hosting PlayStation’s streaming service would be a major coup for Azure, the fastest growing part of Microsoft’s business.
For Sony, if its PlayStation is to remain competitive, it too is likely to need to move heavily into streaming full, high-quality games over the internet.
Industry analysts say Sony might have struggled to do it alone.
"Everybody else has a head start on them,” said Rebekah Valentine, from GamesIndustry.biz.
“There was a lot of discussion that Sony seemed to going the traditional route of making a normal console and continuing with what they had been doing in the past. This partnership with Microsoft shows they are fully exploring streaming technology.”
Sony already has a significant footing in games streaming - its PS Now service, which offers streaming access to the PlayStation back catalogue, accounts for 36% share of the $387m global games streaming market, said analyst Piers Harding-Rolls, from IHS Markit.
However, with the streaming market expected to expand rapidly over the next five years, Sony’s comparative lack of expertise and infrastructure left it exposed.
"It is clear that Microsoft is the best choice for Sony even with the competitive dynamic between Xbox and PlayStation,” Mr Harding-Rolls said.
"Working together they have a better chance to head off competition from the likes of Google, which has gone on to dominate the last wave of technology disruption in the mobile space alongside Apple."
While precise details of the partnership are still vague, the companies also said they would be working together on new semiconductors, image sensors and artificial intelligence.
For Microsoft, that opens the door to getting its cloud technology integrated into more consumer products, such as cameras and televisions, rather than working mostly on business applications as it does today.