The console, currently priced in the UK at £429, with a bundled game, will drop to £399 on Friday and will include major title Titanfall in the package.
So far, the drop will only apply to the UK.
The new cost brings the console in line with the price of Sony’s PlayStation 4, which is outselling Microsoft’s machine.
However, the PlayStation 4 can be bought without a game for £349.
“The reason we’re doing this is that we’re committed to giving gamers the best value that we can,” said Harvey Eagle, Xbox’s marketing director in the UK.
“We’re only a few months into a generation of consoles that are going to last for many many years to come,” he added.