The deal marks the first time Microsoft has full access to ARM's architecture. Previously, Microsoft and ARM have worked together on building mobile and embedded operating systems for devices featuring ARM processors.
It is thought Microsoft may use the licence to develop a version of its Windows OS to work smoothly with ARM processors, which currently feature in a number of low-power PCs, such as netbooks and tablets.
"ARM is an important partner for Microsoft and we deliver multiple operating systems on the company's architecture, most notably Windows Embedded and Windows Phone," said KD Hallman, general manager, Microsoft
"With closer access to the ARM technology we will be able to enhance our research and development activities for ARM-based products."
Mike Muller, CTO at ARM, added that Microsoft has been an important member of the ARM ecosystem for many years.
"With this architecture license, Microsoft will be at the forefront of applying and working with ARM technology in concert with a broad range of businesses addressing multiple application areas," said Muller.