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Intelligence agencies monitored the online games to ensure they were not used as communication channels to bypass surveillance of email and voice communications, the Telegraph reported.
A 2008 US National Security Agency (NSA) document said that online games were a “target-rich communication network” where spies could “hide in plain sight”.
Leaked documents show that intelligence agents logged communications between players on World of Warcraft, Second Life and Xbox Live, but do not indicate the scale of the operations.
UK spy agency GCHQ had sent operatives into Second Life in 2008 and helped UK police break a criminal gang selling stolen credit card information in the virtual world, according to the New York Times.
Other documents reportedly show that RAF Menwith Hill in Yorkshire was used as a base for US and UK agents to enter World of Warcraft.
The minutes of a meeting involving GCHQ’s “network gaming exploitation team” identify engineers, embassy drivers and foreign intelligence workers as players and possible targets for recruitment.
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World of Warcraft maker Blizzard Entertainment told the New York Times that neither the NSA nor GCHQ had sought permission to access gamers’ information.
"We are unaware of any surveillance taking place. If it was, it would have been done without our knowledge or permission," the company said in a statement.
News of spying in virtual worlds comes as eight of the biggest technology companies united to oppose mass surveillance of online activities.
Google, Apple, Facebook, Twitter, AOL, Microsoft, LinkedIn, and Yahoo have formed an alliance called Reform Government Surveillance.
The group has written a letter to the US President and Congress that says documents leaked by Snowden “highlighted the urgent need to reform government surveillance practices worldwide".
"The balance in many countries has tipped too far in favour of the state and away from the rights of the individual,” the letter says.
The firms are concerned that public loss of trust in technology will hurt their businesses, and are calling on governments to help restore that trust.