The company said the new webmail site will have a cleaner look and work well with smartphones and tablets. It will get rid of the display ads and large search boxes that take up space in Hotmail and display 30 per cent more messages than are currently visible in Hotmail and other webmail programs.
In a blog post Tuesday, Microsoft vice-president Chris Jones said the redesign is an attempt to make email relevant again in an era increasingly dominated by mobile devices and social applications.
"Email is becoming less and less useful as inboxes become cluttered with newsletters and social updates, and people increasingly keep up their personal connections in social networks instead of their email address books," Jones wrote.
He said Outlook.com will allow users to more seamlessly stay in contact with their friends on Facebook, Twitter, LinkedIn and Google by displaying status updates, tweets, shared photos and other social network information right in their inbox. It will also eventually integrate Skype video chats.
"Email isn't just about the browser anymore," Jones wrote. "In fact, email represents 20 per cent of the time we spend on smartphones and is used extensively on tablets as well as PCs. Outlook is designed cloud first, so all of your mail is always available wherever you are."
Outlook.com accounts will sync up with calendars, contacts and other user information stored on mobile devices and in the desktop version of Outlook.
Old account details imported into new system
Those who want to test out the new Outlook service can do so at www.outlook.com. Existing Hotmail users can upgrade to an Outlook account in the options menu of their account.
Hotmail addresses, passwords, contacts, email rules and old messages will remain unchanged and be imported into the new system.
Users will be able to send and receive email from their regular @hotmail.com, @msn.com or @live.com addresses and will be able to add an @outlook.com address to their account.
Hotmail was launched in 1996 as one of the first browser-based email services that allowed users to access messages from any computer with an internet connection. It was the most popular webmail service well into the 2000s.
In recent years, it has been overtaken by Google's Gmail, which the company says has about 425 million account holders, compared to Hotmail's 350 million.
According to web metrics company ComScore, Hotmail still has more monthly traffic than any other webmail service — 324 million users a month to Yahoo's 290 million and Gmail's 278 million.