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The partnership means "Minecraft" players using personal computers powered by Nvidia's RTX chips will start seeing the effects of a technology called real-time ray tracing, both companies said in a statement.
Nvidia's graphics cards will essentially be able to simulate how rays of light would interact with virtual objects along an image plane, to convey more realistic lighting and shadows as well as reflections in the water.
The companies didn't disclose any financial details for the partnership. Microsoft said "Minecraft" players will be able to test an option to turn on the more realistic graphics in a beta version slated for release in the new year.
"Ray tracing sits at the center of what we think is next for Minecraft," Saxs Persson, franchise creative director of "Minecraft" at Microsoft, said in a statement.
"GeForce RTX gives the Minecraft world a brand-new feel to it. In normal Minecraft, a block of gold just appears yellow, but with ray tracing turned on, you really get to see the specular highlight, you get to see the reflection, you can even see a mob reflected in it."
"Mob" is the term used to describe the enemies in "Minecraft."
The introduction of more life-like graphics might appear unusual for a game that won acclaim for its simple design based entirely on blocks.
"Minecraft" has seen a surge in popularity since its full release in 2011, particularly among younger gamers. Its developer, Mojang, was bought by Microsoft in 2014.
The game lets players build things and mine for precious minerals in an open world. In May, the Redmond, Washington-based firm said it had sold 176 million copies of the game globally.
Other games that will come equipped with Nvidia's real-time ray tracing tech include Activision's upcoming first-person shooter "Call of Duty: Modern Warfare" and Techland's zombie title "Dying Light 2," Nvidia said.
The news comes after Mojang dropped plans for a graphics pack that would have brought a new look to the game. The Swedish developer said earlier this month that the pack "proved too technically demanding to implement as planned."