The announcement will speed the entry of Linux into the consumer electronics space, where it has already begun to make inroads.
"Linux itself is very good and a well-accepted operating system but it has some points that need to be overcome for it to be applied to digital consumer electronics products such as the start-up time or real-time performance," said Sony spokesman Shinji Obana. "These examples could be said to be shortcomings of Linux so we are going to develop [the OS] further."
The two companies plan to develop a version of the Linux operating system for consumer electronics products from the kernel level up, said Akira Kadota, a spokesman for Matsushita. Their initial goal is to complete the first step of development work before the middle of 2003.
Sony and Matsushita decided to work on improving Linux to cut development costs and also make use of the many Linux developers worldwide.
The two companies are also considering establishing a forum of companies from the consumer electronics and computer sectors. A number of companies have already expressed support for the idea including Hitachi, IBM, NEC, Philips, Samsung and Sharp.
While a firm commitment has not yet been made by the companies "they are basically affirmative", said Kadota.
Sony and Sharp have already released products that bring Linux from the world of the desktop computer or server to a position nearer consumers. Sony's Cocoon hard disc drive-based video recorder is based on Linux as are the three latest Zaurus PDAs to be launched in Japan by Sharp.
Sony's video recorder is based on Montavista Linux, a version of the operating system for embedded devices. Both Sony and Matsushita hold stakes in Montavista Software, alongside IBM, Toshiba, Intel and others.