Xbox Live has changed its policy to allow gamers to display their sexual orientation or gender identity in gamertags.

The previous policy banned players using words such as ‘gay’ and ‘lesbian’ in their gamertags. Microsoft said this was to avoid gamers using the words as terms of abuse.

But after complaints from players who wanted to be out and proud, the company revised its rules.

General manager of Xbox Live Marc Whitten wrote to gamers last week to inform them of the change.

He wrote: “Under our previous policy, some of these expressions of self-identification were not allowed in Gamertags or profiles to prevent the use of these terms as insults or slurs.

“However we have since heard feedback from our customers that while the spirit of this approach was genuine, it inadvertently excluded a part of our Xbox LIVE community.”

The new Code of Conduct says: “Words allowed are ‘lesbian’, ‘gay’, ‘bi’, ‘transgender’ and ‘straight’. Other terms regarding relationship orientation are not allowed.”

Gamers will be barred from using any other words to describe their sexual orientation or gender identity.

Stephen Toulouse, Xbox’s director or policy and enforcement, said that the five words had been chosen because many other terms can be abusive.

According to Eurogamer, he said: “People are kind of curious why we have a list of approved terms to express this. One of the reasons is that so many of the other terms can be used as insults or are frowned upon by a variety of different people, so we thought it would be best to pick a group of words that we would let people know were okay for that expression and anything else we discourage their use.

“And we absolutely will take action if there’s any use of those unapproved terms for hate speech. But we wanted to provide those guides.”

He added: “We want everyone to feel free to express themselves in positive ways – again I want to stress that negative speech and hate speech is not going to be allowed. But hey, we heard you and we made a change and I’m very very happy about that.”

A survey published in 2007 found that online gamers face a homophobic culture.

The Gaymer Survey, conducted at the University of Illinois and involving over 10,000 respondents, found that gay gamers experienced a high level of homophobic attitudes and language.

Eighty-eight per cent of respondents said that they had heard the phrase “that’s so gay”, while 84 per cent said that the word ‘gay’ had been used in a derogatory way.

Over half of the respondents felt that gays were stereotyped, 52 per cent found gaming worlds to be hostile to gay and lesbian gamers and 42 per cent felt that gays were under-represented.

Only a minority of participants (nine per cent) claimed that they had never encountered anti-gay remarks.