The new service, Movielink, is being set up to stop piracy of major Hollywood films. It signals a major push to sell Hollywood films on the net.
The studios include Warner Brothers, Paramount Pictures, Universal Studios, Sony Pictures Entertainment and Metro-Goldwyn-Mayer.
Up to 170 films ranging from recent Oscar winner A Beautiful Mind to 1950s classics such as Breakfast at Tiffany's, can be downloaded.
Other recent blockbusters such as Harry Potter And The Philosopher's Stone and Men In Black are also available and will cost between 2 and 5.
Users will download the film from Movielink to their own computer's hard drive. The film can sit on the user's hard-drive for 30 days before deleting itself.
Once the user starts viewing a movie, they have 24 hours to finish watching it before it's deleted from their computer.
Industry experts believe the new service could be bigger than DVDs in a few years, but viewers will not be able to swap films over the internet.
Meanwhile, blockbusters like Training Day and Ocean's 11 are still
unavailable in the country's largest video rental chain because of a retail dispute.
Xtravision has stopped stocking
titles from Warner Bros Home Video in its 204 stores nationwide.
The dispute was sparked by Warner Bros' decision to change its video
Previously, its films were released for sale six months after the video release. This gave rental chains like Xtravision time to profit on rentals before the film was bought by the general public.
But Warner Bros now release films like Training Day for sale and rental at the same time.
It said independent research showed the move would increase rental incomes by up to 80%.
"We implemented these policies to benefit the consumer and the industry as a whole," Warner Bros spokesperson Catriona Booth said.
But Xtravision, and its parent company Blockbuster refuse to accept the new policy. "Our relations with the film studios are confidential and we don't want to comment on them," Xtravision chief operating officer Gerry Butler said.