The software giant claimed that the resulting technology will offer a single virtualisation technology that will operate across Windows, Linux and Xen-enabled Linux distributions.
Peter Levine, president and chief executive at XenSource, said: "Xen-enabled guests will now run seamlessly on XenEnterprise and, as a result of this agreement, Xen-enabled Linux guests will also run on Windows Server virtualisation.
"XenSource will also deliver additional products based on the collaboratively developed technology, further expanding the value of the relationship."
Microsoft anticipates providing a beta release of Windows Server virtualisation by the end of 2006, and plans to release the solution to manufacturing within 180 days of Windows Server Longhorn, which is targeted for the end of 2007.
XenSource has previously licensed the Microsoft Virtual Hard Disk format to enable interoperability with Microsoft virtualisation technologies.
For customers with Premier-level support agreements, Microsoft said that it will use "commercially reasonable efforts to address potential issues" with Microsoft software running in XenEnterprise.
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