Microsoft has admitted that the Xbox was too expensive at launch and seems to have saved the future of the console by cutting its price.
Sales were so disappointing when the console was first released that many predicted that it would disappear without trace.
But sales jumped 131 per cent in the US following a $100 price cut in May, according to figures from market research group NPD.
John O'Rourke, director of worldwide Xbox marketing, said: "We've learnt a lot about the importance of good pricing and being competitive in the marketplace. We have every intention of being competitive."
The figures from NPD will come as a relief for the software giant. After a slow start, the Xbox is now starting to make some inroads into a market still dominated by Sony's PlayStation 2.
More than 3.9 million units of the Xbox had been sold worldwide by the end of June, but this is still tens of millions fewer than the PlayStation.
Software sales for the Xbox have also been doing well, with Project Gotham Racing and Dead or Alive 3 joining flagship title Halo in shipping more than a million copies worldwide.
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