"Today, we took action," said Larry Hryb, Microsoft's Xbox Live programming director, in a blog post Wednesday.
Hryb, who blogs under the pseudonym Major Nelson, said Microsoft would reset cheaters' "gamerscore" accounts to zero and eliminate all past achievements. Their gamer profiles would also publicly show they've been caught cheating, according to Hryb.
"Xbox Live remains committed to keeping the service free of cheating in order to maintain a fair and level playing field for everyone," said Hryb.
In a separate post, Microsoft said its judgments on whether a player had amassed their score by cheating are final. "The original gamerscore correction will remain permanent without any way to appeal," the company warned.
"Your best choice is to show the community you won't do it again," said Microsoft.
Microsoft said it uses "specific and automated criteria" to determine if players are cheating. Some Xbox Live players have been known to cheat by using third party tools to hack into their saved game files.
Microsoft's crackdown on Xbox Live cheaters is so far proving popular with legitimate players. "About time, how many people have been caught so far?," said a user in a post on the Major Nelson blog. "Good job making the service fair, Microsoft," said another.
In addition to online gaming, Xbox Live also lets users download high-definition movies and TV shows and communicate with each other. The service counts more than 10 million members, according to Microsoft.