Microsoft veteran Phil Spencer will now lead a reorganised Xbox division.
The new-look division combines Xbox, Xbox Live development teams and the Microsoft studios. He will report to Terry Myerson, who is in charge of the group developing operating systems, as the two business areas look to work closer together.
Spencer's new role will see him lead Xbox, Xbox Live, Xbox Music and Xbox Video, along with the Microsoft Studios.
The idea behind the move is to help Xbox operate under a single leader so that it can be a more agile business.
Other Xbox executives Yusuf Mehdi will continue to lead business strategy and marketing, George Peckham will contiue to head up third-party partnerships and Mike Angiulo, who is in charrge of Xbox hardware.
"I love the way the Xbox team is focused on great games and gaming experiences (go, “Titanfall”!), connects with its fans, pushes the boundary of entertainment and has embraced the power of the cloud in such interesting and impactful ways," says Satya Nadella in an statement.
"Phil is the right person to lead Xbox forward."
Spencer added: "I am incredibly proud of the talented Xbox employees around the world and believe, like they do, in the power of technology to bring games and entertainment to life across console, PC, tablet and mobile devices. It’s been a remarkable year for Xbox and I am honored to lead the team at this incredible time for Microsoft and the games industry."