Allen is working with aerospace pioneer Burt Rutan, who collaborated with the tycoon in 2004 to win a $10 million prize for the first flight of a private spaceship that went into space but not orbit.
Allen says his enormous airplane and spaceship system will go to "the next big step: a private orbital space platform business."
The new system is "a radical change" in how people can get to space, and it will "keep America at the forefront of space exploration," Allen said.
Their plane will have a 380-foot (116-meter) wingspan — longer than a football field and wider than the biggest aircraft ever, Howard Hughes' Spruce Goose.
It will launch a space capsule equipped with a booster rocket, which will send the spacecraft into orbit. This method saves money by not using rocket fuel to get off the ground. The spaceship may hold as many as six people.
"When I was growing up, America's space program was the symbol of aspiration," said Allen, who mentioned his love of science fiction and early human spaceflights. "For me, the fascination with space never ended. I never stopped dreaming what might be possible."
For those attracted to difficult technical challenges, space is the ultimate challenge, Allen said.
"It's also the ultimate adventure. We all grew up devouring science fiction and watching Mercury and Gemini, Apollo and the space shuttle. And now we are able to be involved in moving things to the next level," he said, adding that he admires people like Simonyi who have gone into space to experience it.
Allen is not alone in having such dreams, and the money to gamble on making them come true.