Under the Live Search "cashback" program, shoppers using Microsoft's Internet search service will have percentages of purchases refunded.
Rebate money comes from fees merchants agree to pay Microsoft if Live Search online ads result in sales.
"We believe search can offer much more value to consumers and advertisers than it does today," Microsoft chairman Bill Gates said in a release.
"Our goal is to make Live Search the most rewarding commercial search destination on the Web."
The cash back program's more than 700 partners include online auction house eBay, bookstore chain Barnes & Noble and longtime retailer Sears, the technology colossus said.
Rebate incentives are proven ways to gain market share, according to Silicon Valley analyst Rob Enderle.
"Incentives, if done right, can change behavior," Enderle told AFP.
"People will switch over, but the product has to be compelling to hold them. I don't know if Live Search good enough yet. It needs to be clearly superior to Google."
The rebate program appears to be part of a fallback strategy by Microsoft in the wake of a failed bid to buy pioneering Internet firm Yahoo for nearly 50 billion dollars (US).
Microsoft wanted to combine online resources with Yahoo to better battle Google, which claims the lion's share of a fast-growing multi-billion-dollar online search advertising market.
Microsoft could put pressure on Google by expanding the rebate program, say by sharing ad revenues with shoppers or letting money accrue for charities or prize pots that people could win, Enderle said.
"I think it will evolve into something much more dangerous to Google over time," Enderle told AFP. "Long term, I think this will create a price war. Up until now, Google has been taking swipes at Microsoft. Now, Microsoft can take a swipe at Google."
US online retail sales are expected to reach 335 billion dollars annually by 2012 and currently 68 percent of Internet buys begin with search engine queries, according to statistics from eMarketer Inc.
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