The UK intelligence agency GCHQ had previously evaluated the potential of the Xbox 360's Kinect camera for bulk surveillance purposes, a new report claims.
Documents disclosed by The Guardian suggest that the spy agency has already secretly taken images through PC and Mac web-cams, and claims that the Xbox peripheral has the potential to be equally useful.
Files dated between 2008 and 2010 suggest that a surveillance program, codenamed Optic Nerve, collected images of internet users through Yahoo's webcam chat service.
However it is not known whether GCHQ has captured images of users through Microsoft's Kinect, or other game cameras such as Sony's PlayStation Eye. The controversial intelligence agency has a longstanding policy of not disclosing its methods to the public.
But according to documents leaked by surveillance whistleblower Edward Snowden, one GCHQ presentation outlines the potential and capabilities of the Xbox 360's Kinect camera. The UK organisation said Microsoft's device generated "fairly normal webcam traffic", and was under evaluation.
The tranche of leaked documents are dated between 2008 and 2012, so it remains unclear whether GCHQ has ever captured images of Xbox 360 or Xbox One users.
In a statement sent to CVG, a Microsoft spokesperson said the company "has never heard of this program".
"However, we're concerned about any reports of governments surreptitiously collecting private customer data. That's why in December we initiated a broad effort to expand encryption across our services and are advocating for legal reforms."
During a six-month period in 2008, the spy agency secretly collected photos of more than 1.8 million Yahoo users through webcams. The program saved the bulk of images to agency databases, regardless of whether individual users were an intelligence target or not.
Documents show that targeted webcams around the world would take snapshots every five minutes and send the data back to GCHQ. With the assistance of the NSA, it is believed that GCHQ issued automatic searches based on facial recognition technology, hoping to find terrorist targets and other persons of interest.
That would mean innocent people who resemble targets could have been captured and shown to GCHQ analysts.
Yahoo said "we are not aware of, nor would we condone, this reported activity".
The corporation added: "This report, if true, represents a whole new level of violation of our users' privacy that is completely unacceptable, and we strongly call on the world's governments to reform surveillance law."
Microsoft has come under scrutiny regarding its privacy policies. In July it was discovered that the corporation supplied email and Skype details to the NSA. Microsoft said it was legally bound to not discuss the matter openly.
Doubts and suspicions over Microsoft's handling of personal data has not abated. Late in September, a former Microsoft privacy adviser said he no longer trusts the company after reading about the NSA mass-surveillance operation.
Days later it was revealed that Microsoft handed over the personal information of more than a thousand customers to Australian government agents in the first half of 2013.
Its executives have made it clear that they are not aware of mass surveillance on Xbox, nor would they condone it. The company has published a 'full disclosure' FAQ, detailing all of its privacy policies.
In 2009, CVG reported that GCHQ had run an advertisement campaign on Xbox Live, allegedly in a bid to recruit new users.