The "Boot Camp" software, which enables Macs to run either Windows XP or Mac OS X, is available immediately as a download.
"We're pleased that Apple customers are excited about running it, and that Apple is responding to meet the demand," said Kevin Kutz, a director at Microsoft in its Windows business.
It’s a move that could bring over millions of new buyers to the Mac, which is considered by many to be easier to use and more stylish.
Company research has shown two groups of potential customers, what it called "switchers" (those likely to switch from Windows to the Mac OS X operating system) according to Philip Schiller, Apple's senior vice president of worldwide product marketing.
The first group included those who are open to using a Mac but want to run programs, like popular computer games, which work only on Microsoft’s Windows program.
The second group, Mr Schiller said, included those open to using the Mac OS X PC, but wanting a "safety net" if they choose to run Windows.
Apple plans to preview the next major version of its Mac OS X operating system software in August, codenamed Leopard it will also include a Windows option.
End of rivalries?
The decision to allow Windows the capability of running on Mac could bring to a close a decades-long rivalry between Apple and Microsoft.
Over the years, Apple CEO Steve Jobs has poked fun at
Windows, capitalising on the widely held view among the Mac faithful that Windows was inferior to Apple's own operating system.
But just because Windows can now be run on Mac doesn’t mean the system will be supported by Apple, Mr Schiller says the company has "absolutely has no plans to sell or support Windows. We're just helping our customers with Boot Camp to install Windows if they want to".
Apple still sees itself as a major rival to Microsoft, although it has made concessions to Windows users such as allowing them to use its wildly popular iPod music players and iTunes music store.
Windows is used on more than 90 percent of personal computers.
Share surge
News of the move was good for the company, as Apple shares surged nine per cent on Nasdaq, where it was the second most active issue.
"We view this as positive for Apple as it opens a new market to the company and greatly expands the (potential market) for Intel-based Macs," said Deutsche Bank analyst Chris Whitmore in a note to clients.
JP Morgan analyst Chris Shope estimated that each additional percentage point of PC market share would give Apple another US$2 billion (A$2.78 billion) in revenues and more than 30 cents per share in earnings.
Shares of Apple rose $6.04 to close at $67.21 on Nasdaq.
"This is another step in Apple's efforts to expand its total addressable market to include a more mainstream audience," according to a note written by Goldman Sachs analyst Rick Sherlund.
Joe Wilcox, analyst at Jupiter Research, said the move could provide an incentive to purchase a Macintosh, “Apple has removed another barrier to switching," he said.
But he noted that the cost of Mac is already higher and that users will have to buy the Windows software as well.
"Consumers would pay a premium, as much as 200 dollars for Windows XP Home, as installation would require full version, not the upgrade," Wilcox said.