Nokia says the operations that will be transferred to Microsoft had a turnover of some 14.9 billion euros last year. As part of the deal, Microsoft will sign a contract to license Nokia’s mapping service.
Nokia headquarters will remain in Finland.
Risto Siilasmaa, who founded the F-Secure technology security business, will take the reins as interim head of Nokia. Some 32,000 workers will transfer to Microsoft, with 4,700 of them located in Finland.
Nokia's rocky road
Tuesday's sale announcement marked the culmination of a recovery programme spearheaded by chief executive Stephen Elop.
The former flagship of Finnish industry and innovation announced the appointment of the Canadian and former Microsoft senior leadership team member to lead the recovery of its flagging fortunes back in September 2010.
In 2011, the now-infamous "burning platform" memo sent to staff by Elop was leaked. In it, Elop warned that the company would have to undertake drastic measures to return to competitiveness.
One of those recovery strategies involved abandoning Nokia's proprietary Symbian mobile phone platform and migrating its smartphones to the Windows Phone software in an attempt to recover lost ground in the smartphone market. As part of the deal, Microsoft pumped one billion dollars into the company to help with marketing the new Windows-based handset.
The company also engaged in a series of large-scale restructuring and staff cuts in an effort to rein in costs and shore up its cash position.
However Nokia has seen its market share and market value slide since the start of Elop's tenure, and the company was dethroned by Samsung as the king of the mobile handset last year.
Following the news, by 10.30 Tuesday morning Nokia's share price climbed by about 1.20 euros to 4.22 euros on the Helsinki stock exchange.