Microsoft Purview retention policies and retention labels are getting a third action for SharePoint files. Alongside keep and delete, they can archive: move inactive files to Microsoft 365 Archive while the files stay under retention and legal holds. Learn is specific about the consequence. Archived files remain available to eDiscovery and content search, and they're excluded from Microsoft 365 Copilot indexing.
The timing is close. Message Center post MC1325441, updated 19 October, gives worldwide general availability from mid-November to early December 2026, already moved once from early November. The roadmap lists it for November CY2026 (ID 561208).
So the archive period in a retention policy is now also a decision about what Copilot can answer from. That belongs to the records owner, with the business in the room, and not to whoever is trying to bring the storage bill down.
How the archive action behaves
The action is off by default. Existing retention policies and labels don't archive anything until an administrator edits them to add it. In the retention settings the option reads "Archive retained items in secure and compliant Microsoft 365 Archive to reduce cost". The administrator then sets when the archive period starts, from when items were created or when they were last modified, and how long files stay active before they're archived.
A few limits to know before designing around it:
Event-based retention isn't supported for file-level archive. Labels that start their clock on an event, such as a contract ending, can't archive this way.
Items that don't support the archive action stay active.
If a policy evaluates a file that's already archived, it leaves it archived. A policy never reactivates anything.
Manual file archiving doesn't need to be on. Set-SPOTenant -AllowFileArchive $false hides the Archive action from users while policies and labels keep archiving eligible files.
Learn lists a license requirement for file-level archive, and the storage saving depends on pay-as-you-go billing for Microsoft 365 Archive being set up first. Check both before promising anyone a number.
Created or last modified is the real choice
That one setting decides how the policy behaves in a working library.
From last modified, a file stays active as long as people keep editing it. A procedure revised every year never goes cold; a project folder nobody has touched since the project closed moves on schedule. Learn's own retention example shows the same logic for retention periods: a file edited again starts its clock over from the new date.
From created, the clock runs regardless of use. Every file archives at the same age, including the reference document a team reads weekly but never edits. Reading a file resets neither clock.
For most collaboration libraries we'd pick last modified, and keep the "created" clock for content that is genuinely finished at birth, such as signed agreements or issued reports. That second group is also where a retention label set as the library's default usually fits better than a policy across whole sites.
Getting a file back
Any user with read access to an archived file can reactivate it, and Learn's Microsoft 365 Archive page says there's no fee for reactivating a file. After reactivation the file can't be archived again, manually or by policy, for 120 days. When that cooldown ends, the policy archives it again on its next evaluation if it still meets the criteria. Retention and holds keep applying the whole time, through reactivation or deletion.
That makes the user side manageable, provided people know what an archived file looks like and that they can bring it back themselves. Tell them before the first policy runs, not after the first ticket.
Every archive action lands in the audit log as Archived file (FileArchived), with the user or system account that did it. Keep that query handy for the first few weeks.
How it sits next to site archive
Our Microsoft 365 Archive post dealt with archiving whole sites and why that's a records decision with a storage meter attached. This is the file-by-file version, inside sites that stay live. Site and file archive states are independent: archiving a site doesn't change whether its files were already archived, and files archived before a site was archived stay archived when the site comes back.
The signatures
The records owner chooses which retention policies and labels get an archive action, the start point and the active period, in writing. Site owners name the libraries whose old content must stay in Copilot's reach, such as policy libraries people query without editing, and those get excluded or a longer active period. The compliance administrator edits the policies, after the license and billing checks, and watches the FileArchived records once rollout reaches the tenant.
Archive used to mean "cheaper shelf". In Microsoft 365 it now also means "out of Copilot's answers", and that's worth a signature.
