Microsoft won a nearly $US22 billion ($29 billion) contract to supply US Army combat troops with its augmented reality headsets.

Microsoft and the Army separately announced the deal on Wednesday (US time).

The technology is based on Microsoft’s HoloLens headsets, which were originally intended for the video game and entertainment industries.

Pentagon officials have described the futuristic technology — which the Army calls its Integrated Visual Augmentation System — as a way of boosting soldiers’ awareness of their surroundings and their ability to spot targets and dangers.

Microsoft’s head-mounted HoloLens displays let people see virtual imagery superimposed over the physical world in front of them — anything from holograms in virtual game worlds to repair instructions floating over a broken gadget. Users can control what they see using hand gestures or voice commands.

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The Army’s website says soldiers tested the gadgets last year at Fort Pickett in Virginia. It said the system could help troops gain an advantage “on battlefields that are increasingly urban, congested, dark and unpredictable.”

The Army first began testing Microsoft’s system with a $US480 million contract in 2018 and said the headsets could be used for both training and in actual battle. The new contract will enable Microsoft to mass produce units for more than 120,000 soldiers in the Army Close Combat Force. Microsoft said the contract will amount to up to $US21.88 billion over the next decade, with a five-year base agreement that can be extended for another five years.

Microsoft President Brad Smith told the Senate Armed Services Committee in February that the system could integrate thermal night vision and facial recognition to provide soldiers with “real-time analytics” on remote battlefields. He also described how it could help in planning a hostage rescue operation by creating a “digital twin” of the building.