Microsoft has said it will waive the cost of repairs on Xbox 360 consoles manufactured before 1st January 2006, and refund any fees already paid.
The company said that "standard and ongoing" analysis of its repair data had pointed to a large number of problems with a particular group of consoles that made up the initial manufacturing run.
"Returns for repair are coming in for a variety reasons and it's a higher rate than we are satisfied with," it said in a statement reported by The Mercury News.
"We've made the decision to comp repairs for consoles manufactured before January 1, 2006, and provide refunds to the small group of customers who have already paid for repairs."
Customers who have paid for repairs can expect a refund within three to four weeks.
The issue of hardware failures has affected consumers on both sides of the Atlantic, many of whom have voiced their annoyance at being asked to pay for repairs.
Microsoft has previously rejected claims of an unusually high hardware failure rate.