Under the agreement, Microsoft will cover the costs of fuel produced from sustainable resources, like waste oils and agricultural residues, which will result in reduced carbon emissions.
The deal is part of Microsoft's initiative aimed at being carbon neutral by 2030.
It calls for Microsoft to purchase credits for the fuel from the alternative energy firm SkyNRG.
"We are excited to partner with Alaska Airlines to make business air travel a little greener by using sustainable aviation fuel supplied by SkyNRG to reduce the carbon impact of the flights Microsoft employees fly most," said Judson Althoff, executive vice president of Microsoft's Worldwide Commercial Business.
"We hope this sustainable aviation fuel model will be used by other companies as a way to reduce the environmental impact of their business travel."
The agreement applies to Microsoft employee travel between its Seattle headquarters and airports in the San Francisco Bay and Los Angeles area, the most popular routes for the company. The companies will explore expanding the program in the future.
The two firms said they hope others will follow their example and expand the market for sustainable jet fuel.
Brad Tilden, CEO of Alaska Airlines said the tie-up "enables us to fly cleaner and reduce our impact on the environment."