By Darren Waters
Technology editor, BBC News website, in San Francisco
Hobbyist game developers will be able to share their "home brew" titles over Microsoft's Xbox Live online service.
Little Gamers is one of the first community titles
The company has launched a community driven service that will let amateur creators build and distribute games.
"Ten million people will be able to play your games," said Microsoft's Chris Satchell, at the Game Developers Conference in San Francisco.
Microsoft also announced a sequel to its four and a half million-selling game Gears of War.
"I think of this as gaming created by the community and managed by the community but enjoyed by everyone," said Mr Satchell of the new game distribution system.
Microsoft freely distributes tools, called XNA, which gives amateur developers the chance to build games for the Xbox 360 and for Windows.
But until now the games could not be shared. The tools have been downloaded 800,000 times and more than 400 universities worldwide are using the XNA package.
Mr Satchell said it was the democratisation of development and distribution.
"There are tens of thousands of developers out there chomping at the bit; we need to unlock that potential," said John Schappert, head of Live services.
Microsoft also announced that it was planning a revenue sharing model for the community games distributed over Xbox Live.