The agreement will allow any BT Broadband customer with an Xbox 360 to access BT Vision and gain on-demand access to movies, TV shows and sporting events.
"For the first time consumers in the UK will be able to experience the advantages of an advanced TV service together with the benefits of next-generation gaming," said Dan Marks, chief executive of BT Vision.
"Our aim is to provide BT Vision on multiple platforms, giving customers greater convenience, control and flexibility over what they watch, when they watch and how they watch TV.
"It also means that we are able to potentially expand our BT Vision customer base by tapping into the popularity of Xbox 360."
BT Vision customers with an Xbox 360 console can access BT Vision from the Xbox 360 or via the normal set-top box.
Furthermore, by streaming the BT Vision content through the Xbox 360 viewers
can still access other Xbox Live services such as receiving messages from gamer
"This is an exciting moment in home entertainment," said Enrique Rodriguez, corporate vice president of the Connected Television Division at Microsoft.
"Last year at CES, we announced Xbox 360 on Microsoft Mediaroom as a powerful platform capable of enabling new entertainment experiences for consumers, and we are pleased to team with BT to bring this service to market."
This move adds to the range of entertainment services Microsoft is offering via the Xbox 360, such as music and movies.
The BT service should be available to Xbox 360 owners by the middle of 2008.
Some commentators have voiced concerns that the extra strain may cause problems similar to those seen over the holiday period.
Could be used for everything from search-and-rescue robots to wearable tech
Don't require the rare material being mined from the mountains of South America
IBM hopes that its new tool will avoid bias in artificial intelligence
Found by calculating the strength of the material deep inside the crust of neutron stars