The tech companies will help design the subsea cable which will run between Virginia in the US and Bilbao, Spain.
The project will be managed by Spanish telecommunications firm Telefonica, which will sell any unused capacity on the cable to other customers.
The cable will help the tech giants move data more quickly and cheaply between their global data centres.
Tech companies typically have to pay telecommunications firms to use their cables, which can be costly. And the large amounts of data moving across those lines can make them slower.
The project, called MAREA, will be the highest-capacity sub-sea cable across the Atlantic, with an expected capacity of some 160 terabits per second of data, the companies said.
It is not the first subsea cable to be sponsored by a tech company.
In 2014 Google paired up with five telecommunications firms to build a subsea cable across the Pacific Ocean.
Construction of the 6,600km (4,125 miles) long cable is due to start in August and is scheduled to be completed in October 2017.
Microsoft said MAREA will help boost the speed and reliability of its cloud services.
"This marks an important new step in building the next generation infrastructure of the internet," said Microsoft's director of global network acquisition, Frank Rey.
Microsoft has also been testing underwater data centres. These centres would be cheaper to maintain because they would not have the associated cooling costs of data centres on land and could be powered through marine energy.
Facebook and its 1.23 billion monthly active users are also heavily reliant of transferring data and chief executive Mark Zuckerberg has committed to expanding global internet access.
Microsoft and Facebook have announced plans to build the highest capacity data link between the US and Europe.