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The move is widely seen as a response to Google's GMail service which gives all users a gigabyte of storage to keep all their messages.
With the announcement, Hotmail becomes one of a growing pool of e-mail firms offering users huge amounts of storage.
Currently, paying customers of Microsoft's Hotmail get at least 10MB of storage space and those who use it for free have 2MB for their old messages.
Boosting storage limits means Hotmail must revamp its charging system which is based around a "pay more to store more" system.
The new service with the boosted storage will be called Hotmail Plus and will cost $19.95 per year. Users who currently pay more for storage will be moved across to this service.
Users of Hotmail Plus will also be able to send messages with attachments up to 20MB in size.
In a related announcement Microsoft said that it will also start using anti-virus software to spot infected e-mails sent to or from its web-based mail service.
Microsoft's announcement is only the latest response to Google's creation of its GMail service that gives all users a gigabyte of storage and encourages people to keep, rather than delete, old e-mail messages.
Soon after Google's announcement in April Yahoo said it would start offering 100MB to non-paying users and two gigabytes to paying customers. It too changed its charging system and rolled many add-on services into a single subscription package.
Mac users are not losing out either. Spymac is offering users of its Wheel service 1GB of storage space for $39 per year.
The move is widely seen as a response to Google's GMail service which gives all users a gigabyte of storage to keep all their messages.
With the announcement, Hotmail becomes one of a growing pool of e-mail firms offering users huge amounts of storage.
Currently, paying customers of Microsoft's Hotmail get at least 10MB of storage space and those who use it for free have 2MB for their old messages.
Boosting storage limits means Hotmail must revamp its charging system which is based around a "pay more to store more" system.
The new service with the boosted storage will be called Hotmail Plus and will cost $19.95 per year. Users who currently pay more for storage will be moved across to this service.
Users of Hotmail Plus will also be able to send messages with attachments up to 20MB in size.
In a related announcement Microsoft said that it will also start using anti-virus software to spot infected e-mails sent to or from its web-based mail service.
Microsoft's announcement is only the latest response to Google's creation of its GMail service that gives all users a gigabyte of storage and encourages people to keep, rather than delete, old e-mail messages.
Soon after Google's announcement in April Yahoo said it would start offering 100MB to non-paying users and two gigabytes to paying customers. It too changed its charging system and rolled many add-on services into a single subscription package.
Mac users are not losing out either. Spymac is offering users of its Wheel service 1GB of storage space for $39 per year.
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