The tech giant announced the acquisition at the Electronic Entertainment Expo (E3) 2019 event in Los Angeles on Sunday.
"Under the leadership of industry veteran Tim Schafer, Double Fine has been a beacon of creativity and spirit in game development for almost 20 years with classic games like Psychonauts, Brutal Legend and Broken Age," Matt Booty, Head of Microsoft Xbox Game Studios, said in a statement.
Software giant Microsoft has also brought its traditionally console-centric subscription service Xbox Game Pass to Windows 10.
The company is promising a new, "curated library" with more than 100 titles from various third-party developers including Bethesda, Deep Silver, Devolver Digital, Paradox Interactive and Sega.
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