The deal will see the companies share their burgeoning patent portfolios to help drive technological advancements.
The move has sparked rumours that the Microsoft-owned Nokia Lumia smartphone line could incorporate Canon camera tech.
Nokia established itself as a market leader on the cameraphone front with the launch of the 41-megapixel-sensor-packing Lumia 1020, and access to Canon patents will bolster its position.
“This collaborative approach with Canon allows us to deliver inventive technologies that benefit consumers around the world,” said Nick Psyhogeost of Microsoft.
“Microsoft believes cooperative licensing is an effective way to accelerate innovation while reducing patent disputes.”
The deal has also given rise to speculation that the camera firm could adopt Microsoft’s software patents and introduce a Windows Phone-like interface to its hardware.