Microsoft, which has had three versions of its Xbox 360 available at three different prices, also was to announce Thursday it is phasing out the mid-range, Pro, version of the console. It will be available for $249, down from $299, while supplies last.
The cheapest Xbox, the Arcade, which comes without a hard drive, will still cost $199.
The price cuts are effective Friday, said David Dennis, a spokesman for Microsoft.
Video game companies hope the price cuts will re-ignite sales in time for the holiday rush. For the bulk of this year, the industry has suffered from weak sales - hurt by the recession and lackluster game release schedules, which have kept consumers waiting to spend money on new titles.
The announcement from Microsoft leaves only Nintendo Co. without a price cut for the fall, at least for now. The Wii has cost $250 since its launch nearly three years ago.
Redmond, Wash.-based Microsoft has sold more than 31.4 million of the Xbox 360 machines globally, compared with 23.7 million PS3 machines sold by Sony Corp. and 52.6 million Wiis.