Microsoft is working with one of its M12 venture arm’s portfolio companies, Inworld AI, to create an artificial intelligence toolkit for Xbox game developers that allows them to use AI to generate game dialogue and narrative tools.

The AI toolkit will offer an AI “design copilot” and an AI character runtime engine, according to a Microsoft blog post published Monday. 

The design copilot will turn user-generated prompts into game scripts, dialogue trees, and quests, to name a few, while the character engine can generate new stories and can be integrated into the game client, according to the company.

“Our goal is to deliver state-of-the-art AI tools for game developers of any size,” wrote Xbox General Manager of Gaming AI Haiyan Zhang in the post.


“We will collaborate and innovate with game creators inside Xbox studios as well as third-party studios as we develop the tools that meet their needs and inspire new possibilities for future games,” Zhang added.

Microsoft’s announcement framed the AI tools as helpful resources game developers can tap into to improve their games and “empower” themselves. While AI has been a part of gaming in various forms since the arcade era, generative AI powered by large language models (LLMs) are comparatively new.

As more dialogue-generating AI tools like Microsoft and Inworld’s AI toolkit or Ubisoft’s Ghostwriter AI tool are developed for the video games industry, it’s worth considering what impact they might have on the jobs of narrative designers and game writers. Such tools could allow writers to create more stories faster—or could lead to unnatural dialogue and fewer writing jobs overall. 

Microsoft has fleshed out its ethical stance on and approach to AI development through its “Responsible AI Standard” and the section of its site dedicated to advancing AI while maintaining what it calls “ethical principles.”


In August, Inworld AI raised $50 million in Series A funding from the likes of Microsoft’s M12 fund, bringing Inworld’s valuation to over $500 million.

Edited by Andrew Hayward

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