Microsoft invested an undisclosed amount in Cruise, a driverless car unit of General Motors, in the company's latest equity investment round.
The technology giant joined GM, Honda and other institutional investors in the $2 billion funding round that gives the San Francisco-based autonomous driving company a valuation of $30bn.
The entities will work together to create a safer, cleaner and more accessible transport ecosystem for everyone, Microsoft said.
"Advances in digital technology are redefining every aspect of our work and life ... including how we move people and goods," Satya Nadella, chief executive of Microsoft, said.
"As Cruise and GM’s preferred cloud, we will apply the power of Azure to help them scale and make autonomous transportation mainstream," he added.
To unlock the potential of cloud computing for autonomous vehicles, Cruise will leverage Azure - Microsoft’s cloud computing platform - to commercialise its self-driving solutions.
GM bought Cruise for more than $1bn in 2016 when it had only 40 employees. Now it has nearly 2,000 staff and accounts for almost 40 per cent of GM’s market capitalisation.
“Our mission to bring safer, better and more affordable transportation to everyone isn’t just a tech race … it’s also a trust race,” said Cruise chief executive Dan Ammann.
“Microsoft, as the gold standard in the trustworthy democratisation of technology, will be a force multiplier for us as we commercialise our fleet of self-driving, all-electric, shared vehicles,” added Mr Ammann.
Under the agreement, GM will work with Microsoft to accelerate its digitisation initiatives, including collaboration, storage, artificial intelligence and machine learning capabilities.
It will explore opportunities with Microsoft to streamline operations across digital supply chains, foster productivity and bring new mobility services to customers faster, the company said.
"Microsoft is a great addition to the team as we drive towards a future world of zero crashes, zero emissions and zero congestion," said GM chairman and chief executive Mary Barra.
"Microsoft will help us accelerate the commercialisation of Cruise’s all-electric, self-driving vehicles and help GM realise even more benefits from cloud computing," she added.
GM plans to launch 30 new electric vehicles globally by 2025 and create new businesses and services to drive growth.
