Their plans, unveiled Tuesday, call for a twin-fuselage aircraft with wings longer than a football field to carry a rocket high into the atmosphere and drop it, avoiding the need for a launch pad and the expense of additional rocket fuel.
Allen, who teamed up with Rutan in 2004 to send the first privately financed, manned spacecraft into space, said his new project would "keep America at the forefront of space exploration" and give a new generation of children something to dream about.
"We have plenty and many challenges ahead of us," he said at a news conference.
Allen and Rutan join a field crowded with Silicon Valley veterans who grew up on "Star Trek" and now want to fill a void created with the retirement of NASA's space shuttle. Several companies are competing to develop spacecraft to deliver cargo and astronauts to the International Space Station.
Allen bemoaned the fact that government-sponsored spaceflight is waning.
"When I was growing up, America's space program was the symbol of aspiration," he said. "For me, the fascination with space never ended. I never stopped dreaming what might be possible."
Allen and Rutan last collaborated on the experimental SpaceShipOne, which was launched in the air from a special aircraft. It became the first privately financed, manned spacecraft to dash into space in 2004 and later won the $10 million Ansari X Prize for accomplishing the feat twice in two weeks.
Sir Richard Branson's Virgin Galactic licensed the technology and is developing SpaceShipTwo to carry tourists to space.
The new plane will have a wingspan of 380 feet - the world's largest. The plane will carry under its belly a space capsule with its own booster rocket; it will blast into orbit after the plane climbs high into the atmosphere.
This method saves money by not using rocket fuel to get off the ground. Another older rocket company, Orbital Sciences Corp., uses this method for unmanned rockets to launch satellites.
The rockets will eventually carry people, but the first tests, scheduled for 2016, will be unmanned. It should be another five years before people can fly on the system that Allen and Rutan are calling Stratolaunch.
The company, to be based in Huntsville, Ala., bills its method of getting to space as "any orbit, any time." Rutan will build the carrier aircraft, which will use six 747 engines.
The spaceship and booster will be provided by another Internet tycoon, Elon Musk of PayPal, who has built a successful commercial rocket.
Allen left Microsoft in 1983. Since his time at the software giant he has pursued many varied interests. He's the owner of the Seattle Seahawks football team as well as the Portland Trailblazers of the NBA.
Borenstein contributed to this report from Washington.
Stratolaunch Systems, http://www.stratolaunch.com