A European court has turned down an appeal by Microsoft to delay hard-hitting sanctions from the European Commission.
Windows has a virtual monopoly of the operating system market
The US software giant went to the European Court of First Instance to try to get the penalties for abuse of monopoly suspended.
Microsoft wanted to delay the opening up of aspects of its Windows software system to rivals, and a record EU fine.
The court dismissed Microsoft's plea "in its entirety".
Microsoft said after the judgement that it remained confident of coming to an agreement with the Commission.
In March, the European Commission imposed the sanctions on Microsoft after finding that it had abused the virtual monopoly of its Windows computer operating system.
The Commission demanded Microsoft change its business practices, and levied a fine of 497m euros (£331m; $613m), the biggest it had ever imposed in an anti-trust case.
Microsoft had wanted the sanctions to be suspended until its court case on the substance of the EU ruling is completed years from now.
The failure of its initial appeal could have huge commercial implications for the company, since the Commission ordered it to divulge some software secrets and produce a version of Windows without its digital Media Player.
Yet the European Court of First Instance ruled that delaying the execution of the EU ruling would not cause Microsoft irreparable damage.
"Microsoft's application for interim measures is therefore dismissed in its entirety," the court's statement said.
"The evidence adduced by Microsoft is not sufficient to show that implementation of the remedies imposed by the Commission might cause serious and irreparable damage."
The European Court of First Instance is the second-highest court in the EU. However, Microsoft could now take its appeal higher, to the European Court of Justice.
The full appeals process could take up to five years, prompting speculation among IT analysts that Microsoft may have been hoping to persuade the Commission to reopen negotiations - halted before the March ruling - on remedies.
"This is a victory for consumers," said Thomas Vinje, a Brussels lawyer who represented an industry group which dropped out of the case after a $20m settlement with Microsoft.
The Commission's case against Microsoft centred on the software giant's digital Media Player which it includes as part of its Windows operating system.
Brussels determined that the inclusion of Media Player was an abuse of monopoly as it made it very difficult for rivals such as RealNetworks and Apple's QuickTime to get consumers to use their products instead.
The Commission also called for Microsoft to reveal key parts of its software code to enable other software and hardware manufacturers to more easily develop products that work with Windows.
In a statement, Microsoft said the EU's Court of First Instance
had recognised that the company has "powerful arguments" against the
anti-trust ruling, despite finding that the sanctions should be upheld for now.
"We are hopeful that the issues highlighted by the court will create an opportunity for the parties to discuss settlement," it added.