Julie Larson-Green has been appointed leader of Microsoft's new Devices and Studios Engineering Group, taking charge of the Xbox brand.
Larson-Green replaces ex-Interactive Entertainment Business president Don Mattrick who left the company earlier this month to join social games firm Zynga.
Larson-Green previously served as the head of Microsoft's Windows division.
The Devices and Studios Engineering Group has been introduced as part of a major corporate restructuring at Microsoft, replacing the firm's previous Interactive Entertainment Business and housing all hardware development under a single group.
Larson-Green will take responsibility for Microsoft's "studios experiences", including "games, music, video and other entertainment".
Meanwhile, Xbox One's operating system development will continue under Microsoft's new 'Operating Systems Engineering Group' headed up by Terry Myerson.
"Today, we are announcing a far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world," said Microsoft CEO Steve Ballmer in an email to employees.
"Today's announcement will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business."
He continued: "We are rallying behind a single strategy as one company - not a collection of divisional strategies. Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands. We will allocate resources and build devices and services that provide compelling, integrated experiences across the many screens in our lives, with maximum return to shareholders.
"All parts of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers. All parts of the company will contribute to activating high-value experiences for our customers."
Larson-Green's appointment comes just four months before Microsoft's next-gen console, Xbox One, hits stores this November.