The Xbox-Linux project takes advantage of the fact that the Xbox hardware architecture is very similar to that of a PC. A keyboard and mouse can be added through the console's USB ports.
To run Linux, the Xbox requires an extra chip - known as a mod chip - to be installed on the main circuit board, a modification that Microsoft believes enables users to circumvent copyright protection on games.
The 350Mbyte installation is compatible with the PC version of Mandrake Linux 9, which was released last week. It contains the graphical environments Gnome and KDE, as well as software packages such as OpenOffice.org, Gimp, Evolution and Mozilla.
The developers said that mod chips are not illegal in Europe if they are not used with pirated software. The developers are also working on an alternative ROM that will contain no Microsoft code and will not permit running pirated games.
Microsoft representatives in Australia have previously said the company is investigating legal options to stop distribution of mod chips for the Xbox.
The gaming community is full of rumours that Microsoft has succeeded in closing down one of the best-known mod chip retailers, Hong Kong-based Lik Sang International, after taking legal action against the company.