The software giant said it used new technology to compile photographs of cities and terrain into "textured, photorealistic three-dimensional models with engineering level accuracy."
"By helping people visualize information in far more useful and intuitive ways, Virtual Earth 3D takes search to an entirely new level," Microsoft chairman Bill Gates said in a release.
As of Monday, three-dimensional models were available for 15 US cities including San Francisco, Los Angeles, Seattle, San Jose, Las Vegas and Dallas, and Microsoft said it planned to gradually include other cities.
The Virtual Earth maps offer real-time traffic information and business listings, and will include "virtual billboards", according to Microsoft.
"The release of Virtual Earth 3D is a significant step toward creating a truly new dimension in search not only in the look and feel of the experience but in the way consumers and advertisers can be involved," said Microsoft vice president Steve Berkowitz.
Virtual Earth will challenge the Google Earth online mapping, in which users get the illusion of sweeping down to selected spots on the planet from above, while tapping into Google's database of services for the area.