The partners will also kickstart a program to help developers create, publish and sell Xbox One games inChina and other markets where the console is sold, Microsoft said in a statement.
In September last year, Microsoft and BesTV, a subsidiary of Shanghai Media Group, formed a joint venture and invested $237 million in "family games and related services."
Last week, Shanghai's government said console makers such as Microsoft, Sony Corp and Nintendo Co will be able to manufacture and sell consoles in China through "foreign-invested enterprises" in Shanghai's free trade zone.
China had banned game consoles in 2000, citing their negative effect on the mental health of its youth. It temporarily lifted the ban in January.
Pirated and smuggled consoles have been available in China during the ban, but they sold poorly as Chinese gamers predominantly play PC and mobile games.
Yusuf Mehdi, Corporate Vice President of Marketing, Strategy and Business, [wrote] in a blog post, "On behalf of the entire Xbox team, we are incredibly excited to bring Xbox One and the next generation of games, entertainment, online education and fitness to China. Launching Xbox One in China is a significant milestone for us and for the industry, and it's a step forward in our vision to deliver the best games and entertainment experiences to more fans around the world. Enwei Xie will lead Xbox China as general manager, bringing years of Microsoft experience both in China and abroad."
Microsoft has sold more than 5 million Xbox One video game consoles to retailers since its launch in November.
The announcement was first reported by Re/code on Tuesday.
Edited by NDTV Staff from original copy by Reuters