The UK telecoms giant will be working with the world's largest software developer on developing consumer uses for the wireless Net, as well hardware for accessing it.
The alliance will be a boost to Microsoft, whose Windows CE operating system is trailing rival Psion's Epoch software.
Epoch is backed by the world's biggest mobile phone makers, Nokia, Motorola, Ericsson and Matsushita, in the Symbian consortium.
Earlier this week, Symbian and 3Com's Palm Computing, the world's biggest maker of handheld digital organisers, said they were discussing an alliance.
BT and Microsoft are to develop small wireless devices based on Windows CE, which will give users access to information and entertainment, such as music, games and share dealing.
BT said the announcement had been planned for some time, and was not a response to the proposed Symbian-3Com alliance.
BT said: "Both companies are to commit substantial resources to collaborative work in the belief that the market for mobile Internet and multimedia products and services represents a massive opportunity for rapid business growth."
Microsoft chariman Bill Gates said: "Microsoft's platforms and services combined with BT's mobile networks will enable users to access rich, interactive information anytime, anywhere and on any device."
Last week Microsoft and BT said they planned to roll out corporate-based wireless Internet services in Europe beginning with a trial involving about 1,000 mobile phone users at five major companies in Britain and Norway.
They would use the phones to access electronic mail, diaries and data from Web pages customised for the small phone screens.
Psion and Palm establish links
(13 Oct 99 | The Company File)
Microsoft targets Psion
(01 Jun 99 | The Company File)
Internet goes wireless
(08 Feb 99 | The Company File)
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