The company confirmed via Twitter that the service was running again as of 9.30pm UK time (4.30pm ET) on Friday (July 6).
"Xbox LIVE should be back up and running. Thank you for your patience. Game on!" a status update from the XBox support team read.
Microsoft had previously confirmed on that some users were experiencing problems logging into the service from their consoles and via Xbox.com.
Zune services also went down, with scores of users unable to access zune.net or the Zune marketplace.
An explanation for the downtime has yet been given.
The Xbox Live marketplace, user accounts and matchmaking were not affected by the problem.