Microsoft also revealed plans to launch a larger, 120 gigabyte model, the Xbox Elite, costing 449.99 euros in the eurozone or £299.99 in UK shops.
And the price of the less advanced 360 core model, without a hard drive, will fall by 20 euros to 279.99 euros or by £20 to £179.99.
Microsoft said the price cuts would "open the door" to more customers, expanding demand beyond the console's core target market of young men.
Profit hunt
Earlier this month, Microsoft cut Xbox prices in the US by 13%, reacting to Sony's 17% reduction in the price of its PlayStation 3 console.
The Xbox 360 has comfortably outsold PS3 and Nintendo's Wii console in the US, not least because it launched a year earlier than its rivals.
By the end of June it had notched up US sales of 5.6 million units, against 2.8 million Wii sold and 1.4 million PS3.
However, Microsoft has yet to make a profit on the console business it launched in 2001.
