The companies plan to roll out three APIs over the next three years, saying their joint work will allow developers to concentrate on making better graphics rather than making sure the programs can work with each other.
"We believe we have all of the elements - the air, water, and fire, if you will - to create a new era in graphics," said Ed McCracken, the chief executive of Silicon Graphics, the company that developed the technology behind the special effects in such movies as "Jurassic Park" and "Twister."
The companies said the project - code-named Fahrenheit - will also take advantage of future hardware that will run on multiple processors and support advanced graphics.
The companies said the technology would allow complex graphics to run on consumer appliances and set-top boxes as well.
"This technology isn't going to be just technology that reaches the desktop, but reaches a wide range of devices," Paul Maritz, group vice president of platforms and applications at Microsoft.
During a presentation on Wednesday, Microsoft touted the future benefits for business users, showing a Windows graphic featuring three-dimensional windows and wizards. Instead of popping down to the bottom of the screen when closed, the windows folded up and appeared to dissolve into the horizon, moving away from the viewer.
The companies also showed off new applications for the technology including flight simulation games and a 3D model of a rotating Mercedes-Benz that salespeople could manipulate during their demos.
Dataquest analyst Peter Ffoulkes said the move would spawn better and cheaper games and products because programmers would no longer be required to write applications for the two competing graphics standards.
"This is good news for making things more accessible and inexpensive for everyone," he said.
He also said the announcement would help Silicon Graphics, which will be privy to Microsoft's development information before other companies.
"Even if it's just for three or sixth months, it's a way of having a competitive advantage in an open world," Ffoulkes said.
The first API - which will enhance graphics development - is due out next year. Another one, based on SGI's existing Scene Graph technology, will follow in 1999. And the technology aimed at consumer devices is due in 2000.
Hewlett-Packard Co. and Intel Corp. also will be collaborating on some of the technology.
Separately, Silicon Graphics said it was on track to release its line of Visual PC systems by the second half of next year. The computers will support complex graphics programs, be based on Intel Corp.'s chips, and run on Windows NT. SGI said prices would be comparable to high-end PCs and workstations, though it would not release more details.