Xbox One will penalise players who harass others while online and reward gamers who behave.
Griefers and trolls will be identified by a high-profile reputation score, made "just as visible" as your Gamerscore, the company has said.
It's all part of a push to get gamers chatting with other players without having the hassle of weeding out and muting troublemakers.
"You need a community of folks that aren't screaming vulgarities every ten seconds, or the griefers or the harassers," Microsoft's senior product manager Mike Lavin told OXM.
"If people are in your friends list, we're not touching that, we're just making it easier for you to come together. It's really the anonymous side of things where we're making these investments. Ultimately if there's a few per cent of our population that are causing the rest of the population to have a miserable time, we should be able to identify those folks."
Players who enjoy abusing others will gradually find themselves only being paired up with others of a similar poor reputation - a hive of scum and villainy that better behaved players will be separated from.
"If we see consistently that people, for instance, don't like playing with you, that you're consistently blocked, that you're the subject of enforcement actions because you're sending naked pictures of yourself to people that don't want naked pictures of you... Blatant things like that have the ability to quickly reduce your Reputation score.
"You'll start to see some effects if you continue to play bad or harass other people en masse. You'll probably end up starting to play more with other people that are more similar to you."
Conversely, those who behave as upstanding members of the Xbox One community will be rewarded.
"Reputation is just like Achievements - you want your Reputation score as high as you can get it," Lavin continued. "There may even be opportunities where if you participate in some of our community programmes, your reputation can even get higher."
Microsoft is still hammering out the details of how this Reputation system will be presented - a numerical score on your profile? Stars under your name? Eurogamer-style comment negging? Whatever the case, the company seems committed to improving its online environment for its next-gen console.