“Indies” will be able to create their own games, publish to the Xbox when they like, and set their own pricing, the computer giant has confirmed.
Microsoft had previously said it would only allow games from recognised publishers on the new console.
The Xbox One, the successor to the Xbox 360, is to be launched in November.
Microsoft plans to make further announcements about self-publishing in August at the Gamescom conference in Cologne, Germany.
The self-publishing U-turn is the first major announcement since Don Mattrick, former boss of the Xbox division, left to be head of games maker Zynga in July.
Microsoft’s original policy contrasted with that of console rival, Sony, which is seen by many developers as more “indie-friendly”.
In June, Microsoft stopped charging developers for updating their games on the Xbox 360 in a sign that it was responding to criticism from the indie community.