The world's largest software maker and France Telecom held a joint news conference in Paris to say that the partnership would focus initially on mobile phones using wireless technology and on bringing together voice, video and data over networks.
"The first product could be available within a year," Microsoft Chief Executive Steve Ballmer told reporters in Paris.
"We have an extremely buoyant vision of the future," added France Telecom's chairman and CEO, Didier Lombard. Lombard said the two companies were likely to explore working on other projects in this area.
Last week, France Telecom said its LivePhone product, which it is developing with Microsoft, would be ready by the fourth quarter of 2005. The LivePhone product uses wireless technology and is connected to the Internet.
In recent months, several leading software companies and telecommunications companies have announced collaborations in the area of developing new Internet and mobile phone services.
In June, Dutch telecommunications operator KPN chose Siemens as its network equipment supplier to launchover phone lines.
Last month, U.S. software company Intel said it had teamed up with South Korea's KT Corp. to work on long-distance wireless broadband technology.
Ballmer said the costs of developing the various products were most likely to be split evenly between Microsoft and France Telecom.