The headsets, based on commercially available HoloLens, will make soldiers safer and more effective, according to Microsoft technical fellow Alex Kipman.

The Defense Department said the production agreement is for five years with a renewal option -- that could make the contract worth "in excess of $21.88 billion" over 10 years, a Pentagon official said in a statement.

Microsoft will rapidly start producing the so-called Integrated Augmentation System under the contract.

The award aims "to deliver next-generation night vision and situational awareness capabilities to the Close Combat Force at the speed of relevance," the Pentagon said.

A head-mounted display used by soldiers for battle and training will take advantage of sensors for night and thermal vision as well as engaging targets and making tactical decisions, officials said.

"The program delivers enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios," Kipman said in a blog post.

The deal deepens the tie between the Redmond, Washington-based technology titan and the US military.

The Pentagon late last year said it is sticking with its decision to award a $10 billion cloud computing contract to Microsoft, despite Amazon's claims that former President Donald Trump improperly influenced the process.