Xbox Labs explores AI in gaming: Here’s what you can try now

Microsoft has announced Xbox Labs, a new team exploring how emerging technologies—including AI agents—could make games more accessible and give players more ways to create. For now, the website features a video experiment and an option to sign up for updates.

Visitors to the Xbox Labs website can experiment with how videos are displayed. One feature is an ASCII machine, which turns video footage into moving patterns of text characters. The result is a retro effect, with characters combining to form an image.

Visitors can select their own video file. Xbox says the footage is processed locally and is not uploaded. This is a visual experiment; the page does not identify the feature as using a generative AI model.

Those who want to follow future developments can sign up for email updates. The form asks for an email address, country and date of birth. As of October 20, the public website does not yet offer a game builder that lets visitors create a complete game from a text prompt.

Xbox chief Asha Sharma outlined the plans in the announcement. The team brings together game creators, engineers and scientists.

Sharma points to recent projects that bring Windows games to Macs with Apple chips or let games run in browsers. She also sees potential for players to combine different games.

Xbox wants to explore these possibilities and share new tools with developers. The announcement does not yet say which games or tools will come first.

AI agents can write, run and test code. Sharma sees potential for applying them to games. An agent is software that can handle several steps in a programming task, such as modifying a function and checking that the program still works.

For existing games, this could help developers understand and adapt old code. AIWereld previously covered how developers are rebuilding old games for modern devices. One goal could be to make a game less reliant on outdated software.

One example outside Xbox Labs is IsaacRecomp, a fan project based on the original Flash version of The Binding of Isaac. Its creator says AI helped turn the game into a standalone program. According to the project description, it supports higher resolutions and modern controllers, among other features. Players still need their own copy of the original game; the project does not include it.

AI can also introduce errors in projects like these. On October 9, developer Maurice Heumann described an experiment using AI agents to recreate a shooter. The game launched and loaded playable environments, leading the team to initially believe the reconstruction was going well.

Closer inspection, Heumann said, revealed that the agents had invented or removed parts of the game’s logic. The example shows why developers need to test how a game behaves, not just whether it runs. A working start menu says little about whether everything behind it works as intended.

The gap between an early experiment and a finished game matters for new titles, too. Xbox manager Brandon Stirrup recently said he built his first game with AI. He called the result poor, but said it was a starting point he could improve.

Xbox also says it wants to handle intellectual property carefully. The Labs announcement does not yet explain how much freedom creators will have to distribute or combine existing games.