Two 14.2 centimetre displays can be unfolded to create a small tablet device, which uses Google's Android instead of Microsoft Windows.
Both screens can run different apps simultaneously, allowing the user to make calls while running a note-taking app, for example.
"We know, scientifically, that you will be more productive on two screens," said Microsoft’s chief product officer Panos Panay.
Microsofts Surface Duo unfolds like a book
A 360-degree hinge allows the screens to close together to form a protective case, or fold back to be use as a palm-held device.
The phone can be switched into landscape mode and used as keyboard and screen setup, like a laptop, or as a games controller.
Although it can take calls, Panay stressed onstage that the device was not a phone but a "Surface" – Microsoft's new category for personal technology.
The Surface Duo, which will be available to buy in late 2020, was unveiled alongside Surface Earbuds – wireless in-ear headphones – at Microsoft's annual hardware event this week.
Microsoft revealed wireless earbuds as a rival to AirPods
Surface Earbuds, which appear to be Microsoft's answer to Apple's AirPods, have flat discs on the outside of the earbuds will respond to gesture control, so the user can change the volume or pause audio by tapping the outer surface.
Pairs of Surface Earbuds will come with a case that charges them.
These earbuds will also have voice control, and if they have an Office 365 subscription the Surface Earbuds can be used to direct Powerpoint presentations.
Microsoft also revealed details of the Surface Neo – a laptop with two screens that is only 5.6 millimetres thick.
The Surface Neo is surrounded by a protective layer of chemically strengthened Gorilla Glass. It will run on an Intel Lakefield processor and have a new version of Windows, called Windows 10X.
Other technology launched by the company at the event included the Surface Pro X, a 2-in-1 laptop and tablet with a detachable screen, and updates to its existing models the Surface Laptop 3 and Surface.
Last year Microsoft launched an Xbox controller that was adapted for gamers with disabilities.
Rival tech company Samsung had to postpone the launch of its folding phone the Galaxy Fold after problems with its screen breaking.