Microsoft's launched a test version of the Skype Translator which decodes conversations in Spanish and English in real time.
It means that during video calls people who speak those languages will be able to talk freely.
Gurdeep Pall from Microsoft says it follows more than 10 years of investment.
"Skype Translator will open up endless possibilities for people around the world to connect, communicate and collaborate," he said.
"People will no longer be hindered by geography and language."
It's been trialled on school children in Mexico City and Tacoma in Washington, one classroom speaking Spanish and the other speaking English.
They played a game called Mystery Skype where pupils from one school asked questions to try to work out which part of the world the other school was in.
The Skype Translator service is available in English and Spanish but Microsoft says it will eventually be available in more languages.
There are more than 40 instant messaging languages available to customers who have signed up via the Skype Translator page and are using Windows 8.1.
According to Microsoft more than 300 million people use Skype each month, totalling more than 2 billion minutes of conversation a day.
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Instant translation of foreign languages on Skype has moved a step closer.