The decision could see Windows XP enjoy an even longer life
Anyone buying a PC with Windows 7 pre-installed will be able to swap it for XP or Vista.
Microsoft has confirmed that the licence conditions under which the software will be sold will allow people to downgrade.
The conditions will apply to both businesses that buy licences for Windows in bulk and consumers that get the operating system on a PC or laptop.
No firm date has been given for the release of Windows 7's final version.
Downgrade rights are common in Microsoft licensing terms and conditions and customers who buy large volumes of Windows operating systems have always been able to roll back to previous versions.
Microsoft has twice granted Windows XP a reprieve to allow computer makers to get licences for it for far longer than was originally planned.
Windows XP, released to consumers in 2001, was also granted a lifeline to ensure that it could be used on so-called netbooks - cut-down net-capable laptops that are proving very popular.
At the same time, computer makers such as Dell and HP have been exploiting clauses in the licensing terms that let them rollback machines with Vista pre-installed to the older operating system.
The news comes as the cut-off date for free mainstream support for Windows XP ends. From 14 April, Windows XP and Home plus Office 2003 enter their "extended support" period.
This means the only updates and bug fixes these products will get will be to improve security.
Microsoft has said that the release candidate of Windows 7, which will be broadly similar to the final version, will be released in late May 2009. The final version is expected in January 2010.