It is expected Sony will use Microsoft’s Azure cloud service to host its upcoming PlayStation streaming service.
Microsoft has been trialling a streaming offer of its own, under its Xbox brand.
The firms said they would also work together on semiconductors and artificial intelligence applications.
"For many years, Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas,” said Kenichio Yoshida, Sony’s chief executive.
“I believe that our joint development of future cloud solutions will contribute greatly to the advancement of interactive content.”
Microsoft’s chief executive, Satya Nadella, said: "Sony has always been a leader in both entertainment and technology, and the collaboration we announced today builds on this history of innovation.”
The two companies have been bitter rivals in gaming since the launch of the first Xbox console in 2001.
But in its pursuit to compete with Amazon Web Services, hosting PlayStation’s streaming service would be a major coup for Azure, the fastest growing part of Microsoft’s business.
For Sony, if its PlayStation is to remain competitive, it too is likely to need to move heavily into streaming full, high-quality games over the internet.
Industry analysts say Sony might have struggled to do it alone.
"Everybody else has a head start on them,” said Rebekah Valentine, from GamesIndustry.biz.
“There was a lot of discussion that Sony seemed to going the traditional route of making a normal console and continuing with what they had been doing in the past. This partnership with Microsoft shows they are fully exploring streaming technology.”