Bungie will once again begin the process of becoming an independent company after operating as a subsidiary of Microsoft since being acquired in June 2000.
As part of the deal, Microsoft will retain the rights to the Halo franchise. The hugely successful first-person shooter series has been widely credited with helping to establish the Xbox 360 as a major games console.
In explaining the move, Bungie founder Jason Jones likened the company's position to that of a shark.
"We have to keep moving to survive," he said. "We have to continually test ourselves, or we might as well be dolphins. Or manatees."
Both companies vowed to continue a publishing agreement which will include development of future Halo titles, as well as what was termed a " primary focus" on Microsoft's platforms.
Neither company would elaborate on the agreement, but reports suggest that Microsoft will retain rights of first refusal to all future Bungie titles, allowing for early or exclusive release of games on the Xbox 360 platform.
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