The company will continue to provide warranty and product support for existing HD DVD players, it said.
The Xbox 360 has a standard DVD drive built in: support for high-definition content came only with an add-on. Sony's Playstation 3 console, however, has a Blu-ray Disc drive built in, which helped grow support for the rival high-definition format.
Microsoft's announcement comes barely a week after HD DVD's main backer, Toshiba, said it will stop making the drives in the face of declining support for its high-definition format from retailers and studios. HD DVD's other supporters included Microsoft, Intel, HP and Universal Studios. Blu-ray also had the support of Panasonic and Samsung.
Warner Bros., which initially supported HD DVD, said early this year it would switch to Blu-ray Disc, a decision widely seen as a mortal blow to the format. Retailer Wal-Mart also recently said it would no longer sell HD DVDs.
Initially, Microsoft said Toshiba's announcement would have no effect on its Xbox plans.
A Microsoft spokesperson said Monday morning that the company is taking the long-term view that support for specific high-definition drives is less important as people increasingly look to download movies and content from the Internet.
Microsoft's Xbox Live Marketplace lets people download content to their Xbox or PC from major studios such as Paramount Studios and Warner Bros., with recent titles such as "Ocean's Thirteen."
That movie, which costs US$39.26 to download from the site, lets a user keep one copy on their PC and one copy on their mobile device. The movie is encoded in Microsoft's Windows Media Player format.