The revamped service will help sort messages as they arrive and allow users to make internet calls on Skype.
It said the move would help tackle the problem of "cluttered" inboxes.
The action may also be designed to win over users of Google's rival G mail service.
Microsoft said that in many cases e mail had become a "chore" because its users accounts had become "overloaded" with material.
Its solution is to automatically sort messages into different areas to distinguish between e mails from contacts, newsletters, package delivery notices, social network posts and other identifiers determined by the account holder.
In addition it is taking steps to link the Outlook account with other services the user might have subscribed to.
"We are giving you the first e mail service that is connected to Facebook, Twitter, Linkedin, Google, and soon, Skype, to bring relevant context and communications to your e mail," the firm's Chris Jones said on its blog.
"In the Outlook.com inbox, your personal e mail comes alive with photos of your friends, recent status updates and tweets that your friend has shared with you, the ability to chat and video call - all powered by an always up-to-date contact list that is connected to your social networks."
In what may be perceived as a dig at Google, Mr Jones added that the firm would not scan e mail content or attachments in order to sell the information to advertisers or others.
He also announced that web versions of the firm's Office apps were built-in, potentially helping it counter competition from other web-based application suits such as Google Docs and Zoho Docs.