GCHQ and the NSA both infiltrated games such as World of Warcraft and the Xbox Live platform as part of their Prism operations, it has emerged.
The Guardian reported the campaign of spying was leaked in a document from Edward Snowden.
The document, entitled Exploiting Terrorist Use of Games & Virtual Environments, was written in 2008 and claimed games were a "target rich communications network" and that agencies slurped up vast amounts of data.
The NSA said the games could allow surveillance targets to hide in plain sight.
"We know that terrorists use many feature-rich internet communications media for operational purposes such as email, VoIP, chat, proxies, and web forums and it is highly likely they will be making wide use of the many communications features offered by Games and Virtual Environments (GVE) by 2010," the document said.
"The SIGINT Enterprise needs to begin taking action now to plan for collection, processing, presentation, and analysis of these communications."
The document also show how spy agencies tried to recruit informants to help find terrorists using games as a cover.
However, so many spies infiltrated the games leading to spy agencies setting up a "de-confliction" group to make sure agents didn't erroneously spy on each other.
It is unclear if the action taken by spies to infiltrate games ever resulted in the foiling of a terrorist plot. The document said the "amount of GVEs in the world is growing but the specific ones that CT [counter-terrorism] needs to be methodically discovered and validated. Only then can we find evidence that GVEs are being used for operational uses."
In a statement, Blizzard Entertainment, the company behind World of Warcraft, said: "We are unaware of any surveillance taking place. If it was, it would have been done without our knowledge or permission."
Microsoft also made similar statements.
The news comes as a group of major tech companies have asked the US government to reform surveillance laws.
