No specific details regarding the headset or games that can be played on it have been revealed, but developers also working on the Xbox One console have reportedly received a developers kit.
READ MORE: Microsoft Xbox One review
DigiTimes also understands that production of the headset is being overseen by Microsoft's own hardware team. The same team is in charge of production of Microsoft's Surface tablet. It's rumoured that mass production will begin in 2015.
READ MORE: Microsoft Surface Pro 3 review
We could therefore be in for a three-way virtual reality gaming showdown at E3. As ever, we'll bring you the latest news as and when we hear it.
The news follows recent announcements that Apple is also allegedly working on its own virtual reality headset for mobile gaming.