The center will focus on technologies for the China market and concentrate in two areas: mobile devices and on ways to build products on top of Microsoft's software.
"Today's announcement signifies another step in Microsoft's continuing efforts to build stronger collaborations with local partners, and foster a flourishing innovation ecosystem in China," Microsoft Chief Research and Strategy Officer Craig Mundie said in a statement.
The announcement comes ahead of Microsoft Chairman Bill Gates' visit to Beijing, where he will address a forum of government leaders on Thursday.
The new joint effort will be set up inside Lenovo's existing research center in Beijing. Microsoft and Lenovo will split the costs of the facility and will share the intellectual property that is developed there.
Lenovo Chief Technology Officer George He said that the move is a recognition of the role personal computing plays in the digital lifestyle and will strengthen existing collaboration between the two companies.
"By combining global PC and leading software companies, this joint innovation center will help Lenovo enhance competitiveness for Microsoft-based products and maintain a leading position in the IT industry," he said in a statement.
In March, Microsoft and Lenovo announced a deal under which the Chinese computer maker would beginon all of its PCs worldwide. The two also have an under which Lenovo agreed to purchase certain levels of software from Microsoft.
Lenovo became the world's third-largest computer maker in May 2005, when itto for $1.75 billion.