Edge, a leading video games magazine, reported that the new console would include a Blu-ray drive and that games would be played from disc. However, the magazine said, "it is believed that games purchased on disc will ship with activation codes, and will have no value beyond the initial user".
Edge also reported that the Xbox 720 will ship with an advanced version of Microsoft's groundbreaking Kinect motion controller and an AMD eight-core x64 1.6GHz CPU.
The latest rumours about the next Xbox have emerged as Sony prepares for an event in New York next week, at which it is widely expected to announce the PlayStation 4.
Microsoft is meanwhile expected to unveil its new hardware at the E3 video games show in June after Lawrence Hryb, the director of programming for Xbox Live, posted a timer on his blog counting down to the event.
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