Microsoft will not include Internet Explorer in European versions of Windows 7 when the operating system launches later this year.
Windows 7, which will launch on 22 October, is Microsoft's replacement for Windows Vista, which like previous versions of Windows had the Internet Explorer browser built in.
Microsoft's decision comes after previous run-ins with the European Commission over what the EC sees as monopolistic practices.
Other browser vendors such Mozilla and Opera have complained that by bundling IE with Windows Microsoft gains an unfair advantage in the market.
"We're committed to making Windows 7 available in Europe at the same time that it launches in the rest of the world but we also must comply with European competition law as we launch the product," said Dave Heiner of Microsoft.
The company described the decision to leave Internet Explorer out of Windows 7 as "the best path forward".
The European Commission cautiously welcomed the move but said it "could be negated by other actions by Microsoft".
Microsoft was fined £765m last year after the EC decided that bundling IE and Windows Media Player in Windows stifled competition.