Windows Live Messenger allows users of Xbox Live, PCs (Both on the Windows and Macintosh platforms), and Windows Mobile devices to connect and directly message each other. It is possible to chat with up to six people at one time, while playing games, listening to music, or watching movies. This complements the existing voice and video chat of Xbox Live. Users will see at a glance if their existing contacts on Windows Live Messenger have Gamertags. As of the December 4, 2007 dashboard update, Windows Live Messengeron Xbox Live is now available to child accounts if the user is 13 years of age or older.

On September 4, 2007, Microsoft launched the Xbox 360 Messenger Kit, a small QWERTY keypad that connects directly into the Xbox 360 controller, either wired or wireless, to support text and instant messaging.

Current features

• Mottos for display on gamer profiles
• Game achievements, which are earned during gameplay
• Reputation rating which is voted on by other players who decide to either prefer or avoid another player. The reputation defaults to 100% (Five stars) over time after one player has preferred you.
• Gamerscores, which are a total of a player's achievement points
• Friends list, which is a list of a player's chosen friends, up to 100 friends allowed
• Recent player list, which lists the last 50 players a user has played with
• Complaint filing system, which allows a user to report another user that has broken the Xbox Live Terms of Use
• Windows Live messenger integration
• Access to Xbox Live Marketplace content, including new game content, games and movies
• Voice Chat (wireless or wired headset required, Xbox Live Silver members are limited to two-player voice chat, while 3+ player voice chat has been implemented for Gold members with the New Xbox Experience)
• Video Chat (Live Vision camera required, with headset optional for chatting)
• Multiplayer gameplay, where a user can link up 4 Xbox's to play together (known as system link), or connect online (Online requires Xbox Live Gold)
• Enhanced matchmaking using cumulative gamerscore, reputation, location/language profile, and gamer zone
• Bio section in which one can list personal interests, URLs, etc.
• Parental controls, limiting children's exposure to other users ("Family Settings")
• Inside Xbox is a newsletter about Xbox Live news, events, products, interviews and games that is integrated in the Xbox 360 Dashboard. Content for Inside Xbox is created by the Xbox global marketing team and features streaming video segments "Pick Up and Play", "Major’s Minute" with Larry Hryb and "Game with Fame".
• Avatar Marketplace offers premium clothing, as well as interactive props and game styles for Avatars.
• Games on Demand offers a selected catalogue of Xbox 360 video games that are available for download over Xbox Live, utilising real world currency as opposed to Microsoft Points.