It will offer free digital literacy training online for everyone in the UK and specifically target 30,000 UK public servants to improve their knowledge.
It will also aim to train 500,000 people in the UK with advanced training in cloud technology by 2020 and create 30,000 new digital apprenticeships.
The move was welcomed by the chancellor Philip Hammond as part of the newly launched industrial strategy.
“This is further evidence that Britain is one of the best places in the world to do digital business. Microsoft’s commitment to training, technology and apprenticeships will ensure that we remain at the cutting edge of innovation," said Hammond.
Our technology industry is fundamental to securing future economic growth and this government is committed to ensuring it continues to thrive. It’s a key part of our industrial strategy to back Britain for the long term, creating the conditions where business can flourish, driving growth for the whole nation.
The move signals the tech giant's commitment to the UK after Brexit.
Microsoft's UK chief executive Cindy Rose said: "In the wake of the EU referendum vote, the UK is looking at charting a new and different path to its future and Microsoft is committed, as it has been for more than 30 years, to helping the UK realise its full potential.
"We believe maintaining the UK’s global competitiveness relies on a successful transition to a cloud-enabled economy. At Microsoft, we aim to do our part by investing back into the UK digital economy to ensure people of all ages and backgrounds are equipped with the skills necessary to thrive into the future."
Google promised free digital skills training to everyone in the UK at the end of last year, while Amazon pledged to help young people and ex-military personnel to adapt to the digital demands of future work through Amazon Web Services' AWS:restart programme.
It's estimated that the the UK's lack of digital know-how is costing the UK £63bn a year in lost GDP.
But plugging the digital skills gap was revealed as a major part of Prime Minister Theresa May's modern industrial strategy announced last week, one of 10 key pillars for creating a modern economy.