The fine is the largest ever issued by the commission.
The commission claimed that Microsoft charged "unreasonable prices for access to interface documentation for work group servers," The Wall Street Journal reported.
In overcharging competitors for documentation that would allow them to create software compatible with its own, Microsoft was taking advantage of its strength, the commission ruled.
The fine creates a total of $2.5 billion in fines the commission has ordered Microsoft to pay. The commission fined Microsoft $739 million in 2004 for alleged monopolistic behavior. The commission added $417 million in 2006, when Microsoft failed to comply with the commission's ruling, the report said.
"I hope that today's decision closes a dark chapter in Microsoft's record of noncompliance," European Competition Commissioner Neelie Kroes said.