Microsoft agreed to support other browsers on its operating system
Microsoft has reached agreement with European Union anti-trust regulators to allow European users a choice of web browsers.
The accord ends 10 years of dispute between the two sides.
Over that time, the EU imposed fines totalling 1.68bn euros ($2.44bn, £1.5bn).
The European Commission said Microsoft's legally binding agreement ended the dispute and averted a possible fine for the company.
The Commission's concern was that the US computer giant may have broken competition rules by bundling its Internet Explorer web browser with its dominant Windows operating system.
Competition Commissioner Neelie Kroes said: "Millions of European consumers will benefit from this decision by having a free choice about which web browser they use."
Microsoft general counsel Brad Smith said the company was "embarking on a path that will require significant change".
"Nevertheless, we believe that these are important steps that resolve these competition law concerns," he added.
Ms Kroes said Microsoft's pledge was an incentive for web browser companies to innovate and offer better browsers in the future.
Internet Explorer is used by more than half of global internet users, with Mozilla's Firefox at about 32% and Norway's Opera with 2%.
It was the minnow operator, Opera, that brought the latest complaint about browsers in 2007.
THE STORY SO FAR
Dec 1998 - Sun Microsystems lodges first complaint about Microsoft dominance
Feb 2000 - Commission launches investigation after claims Microsoft was not sharing information about its Media Player
March 2004 - Commission fines Microsoft and orders it to share information
Dec 2007 - New investigation after Opera complains about browsers
Feb 2008 - Commission raises 2004 fine
Jan 2009 - Commission accuses Microsoft of illegally tying Internet Explorer to Windows
July 2009 - Microsoft agrees to browser choice screen proposal
Dec 2009 - Commission wraps up investigation
The company's chief executive, Jon von Tetzchner, agreed the move would boost innovation.
"This is a victory for the future of the web. This decision is also a celebration of open web standards, as these shared guidelines are the necessary ingredients for innovation."
Nevertheless, we believe that these are important steps that resolve these competition law concerns."
Microsoft's commitments on web browsers will be valid in the European Economic Area for five years.
In preliminary findings released in January, the European Commission said Microsoft "may have infringed" a European Treaty by "abusing its dominant market position" by bundling the company's web browser with its Windows PC operating system.
In July, Microsoft proposed a consumer choice screen that allowed users to pick from a number of different browsers.
The Commission then asked Microsoft to improve the choice screen, which it has now done.
In 2004, the EU fined Microsoft and forced it to offer a version of its Windows operating system without Microsoft's own media player.
The company was also told to give rivals more information about how Windows works, so they could make their own software integrate better with the operating system.
Microsoft appealed against the decision but lost its case in 2007.
There remain, though, unresolved areas of dispute between the two parties. Although here, too, progress has been made.
Microsoft has submitted an improved version of undertakings it made in July on interoperability.
These are designed to address EU concerns about improving the compatibility of third-party products with several Microsoft ones, such as Windows and Microsoft Office.
The Commission welcomed this move too, but said it would monitor its impact on the market. Any findings would be taken into account in a pending anti-trust investigation on interoperability, it said.