Movies including Kill Bill and Pulp Fiction will be made available for BT Vision customers to watch on-demand after a tie-up with film studio Miramax.
The licensing agreement will open up a library of films to BT Vision Unlimited customers, who pay a monthly subscription of £12.50 for a package of channels through a set-top box connected to the internet.
BT Vision customers already watch some 2 million movies on-demand a month, and the deal will expand the choice to include titles including The English Patient, the first three Scream horror films and Good Will Hunting starring Matt Damon.
The move reflects the growing demand for online TV as companies such as Netflix and Lovefilm shake up the market by offering more films to download.
YouView, a collaboration between the BBC, ITV and telecoms companies including BT, is expected to launch by the summer, with a new internet-connected set-top box.
BSkyB today said it will launch a new internet TV service in the first half of this year aimed at the 13 million households who do not subscribe to pay TV.
It will initially allow customers to pay to download films but will expand its offer to include sport and entertainment soon afterwards.
And Sky yesterday said the BBC's iPlayer service, which allows much of its content to replayed, will also be available to its viewers through its Anytime catch-up service later this year.