Microsoft's game development division confirmed today the purchase of British game developer Peter Molineux's Lionhead Studios, creator of the "Fable" series for the Xbox.
Financial terms of the deal were not disclosed, but under the agreement, Lionhead will develop games exclusively for the Xbox 360 console and platforms operating on Windows.
The founder of Lionhead Studios, Peter Molyneux is one of the UK's leading figures from the world of video games. The veteran game maker is best known for inventing the god game genre, where players control all that happens.
"What we love about Peter is the innovation he brings," said Microsoft gaming division head Peter Moore.
"We are delighted about this," Mr Moore told the BBC News web site
. "Not least is the fact the Peter Molyneux is probably one of the most accomplished game developers in the world."
Mr Molyneux has been a pivotal figure in the British computer games industry for almost 20 years, and was made an OBE last year.
He set up Lionhead Studios in 1997 which was behind the ambitious and widely acclaimed game Black & White.
Molyneux responded in a statement: "This acquisition gives Lionhead the stability and opportunity to focus on creating world-class next-generation titles."
No details were disclosed on the games Lionhead will be developing for Microsoft.
It seems likely that one of them will be a sequel to the role-playing game Fable, which Lionhead produced for the original Xbox and has sold more than two million copies worldwide.
Lionhead games are also expected to appear for the next version of Windows, called Vista.