Bill Gates has said that the much-awaited successor to the Xbox gives Microsoft a chance to beat Sony for the first time.
The Xbox will be redesigned
Speaking at a meeting of business journalists, Microsoft's chairman said those working on the console were convinced it can take top position.
He revealed that the new console will be a digital entertainment hub.
It will have improved tools to make multiplayer online gaming more sociable.
Taking on Playstation
Mr Gates hopes Xenon will take on the Playstation
The software menu for the new Xbox - codenamed Xenon - would be similar to that of the company's Media Centre edition of Windows, he told the annual meeting of the Society of American Business Editors and Writers.
"If you're used to that menu, when you use this Xenon you'll see a menu a lot like that that lets you get photos, TV, music and all those different things," he said.
Mr Gates was bullish about how well the Xbox will compete with Sony's Playstation.
"We came out of this round a strong number two," he said.
"Now people are looking at the two companies at a pretty much equal basis," he added.
People closely involved in the development of Xenon were convinced that the Xenon would allow Microsoft to beat Sony, he said.
Both companies are expected to reveal further details of their next-generation consoles at gaming conference E3, later this month.
Xenon will be officially unveiled on MTV on 12 May, several days before the conference.
Speculation about the Xenon's functions and design has been rife on internet sites.
Some are reporting that the console will be backwards compatible - allowing users to play current Xbox games on it.
Others have speculated that Microsoft may make a nod to Apple-inspired design, with a sleek white box.
Mr Gates was giving no details away at this stage, although he did take the opportunity to take a dig at Apple's forthcoming new operating system, Tiger.
He also revealed that he may join the burgeoning group of bloggers online.
"I keep thinking about when I am going to start doing a blog," he said.
"My rate has proven to be irregular so far. When I turn out at least two a month, they'll put me online."