Microsoft Corporation's move, considered as a big change in its business model, is targeted to give a tough competition to other major operating systems available in the market including iOS of Apple and Google's Android.
The software giant, so far, had been charging anything between USD5 and USD15 from phone and tablet makers to use its Windows system. It had been charging higher process from manufacturers of personal computers.
At its annual developers conference in San Francisco, Terry Myerson, Microsoft Corporation's executive vice president of Operating Systems, announced that Windows will be free for 'Internet of Things' devices, the small gadgets that will have ability to connect to the web and process information.
"We want to get this platform out there. We want to remove all friction. To drive adoption of your applications, on phones and tablets less than 9-inches, we are making Windows available for zero dollars," he said.
The announcement was welcomed by the IT sector and developers, who described it as a bold move.
"In my view, this is one of the boldest moves Microsoft Corporation has made in recent memory" Al Gillen, an analyst with IDC, was quoted by IT magazine Computer World as saying.
"This is a very big deal. It's a change at how they look at their cash cow, looking at the bigger picture now and what they need to do to win the mobile story, if you like," Carolina Milanesi, strategic insight director of Kantar Worldpanel ComTech, said.
The experts have said Microsoft Corporation is placing more and more important on the cloud, and increased interest in the idea of the 'Internet of Things' means that there is a huge market to be tapped into.
Statistically, while Windows-powered phones held only three per cent of the global smartphone market last year, Windows tablets had only about two per cent of the tablet market.
The global software major Microsoft Corporation also announced a partnership with India's homegrown smartphone maker Micromax to build devices.
The move, though surprising, is expected to intensify competition in the smartphone and tablets space, especially in the backdrop of Microsoft Corporation's plans last year to acquire the handset business of Finnish phone maker Nokia for USD 7.2 billion.