Microsoft will acquire the maker of the popular game Minecraft for $US2.5 billion ($A2.7 billion).
The technology company said it will buy Stockholm-based game maker Mojang.
Minecraft, which lets users build in and explore a virtual world, has been downloaded 100 million times on PC alone since its launch in 2009.
It is the most popular online game on Xbox, and the top paid app for Apple's iOS and Google's Android operating system in the US.
The deal is expected to close in late 2014.
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Microsoft expects the acquisition to be break-even in fiscal 2015.
Microsoft is primarily known for business software like Word and Outlook.
But this acquisition will help Microsoft expand its gaming division, which also includes game franchises such as the Halo shooter game and Forza racing game.
