Taking the lead from Apple, Microsoft says Windows will go touch-based.
Windows 7, the successor to the much-criticised Windows Vista, will come with multi-touch features that Microsoft chairman Bill Gates predicts will ultimately replace the mouse.
Due for release in 2010, Windows 7 will come with a touch-screen interface that will allow users to enlarge and shrink photos, trace routes on maps, paint pictures or even play the piano.
Gates said at the All Things Digital conference in San Diego in the countdown to his July departure from the company that Windows 7 would embrace new forms of communication and interaction.
"The way you interact with the system will change dramatically," he said. " Today almost all the interaction is keyboard-mouse. Over the years to come, the role of speech, vision, ink - all of those things - will be huge."
In contrast to the heavy pre-launch hype surrounding Vista, Microsoft has so far revealed little about the company's next operating system.
Gates was joined by chief executive Steve Ballmer who described the multi-touch screen demonstration as "just a smallest snippet" of Windows 7.
Ballmer also said he was aiming for Windows 7 "to do better" than Windows Vista.
Ballmer claimed that Microsoft has sold 150 million copies of Vista since its launch in January 2007.