Facebook is only expected to make a £15m profit this year, so Microsoft is getting in quick in the hope that social networking sites become big business.
The move is designed to help Redmond expand its web advertising strategy and promote its own web services.
Under the expanded strategic alliance that is part of the deal, Microsoft will be the exclusive third-party advertising platform partner for Facebook, and will begin to sell advertising for Facebook internationally in addition to the US.
"We are pleased to take our Microsoft partnership to the next level," said Owen Van Natta, chief revenue officer at Facebook. "We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users of Facebook."
Microsoft was battling with Google to take a stake in Facebook, and Yahoo tried to buy the firm last year.