It also found that Media Saturn, which owns Europe's biggest consumer electronics retailer Media Markt, had been given money so that it would only sell computers containing Intel chips.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Competition Commissioner Neelie Kroes.
"Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated."
A Commission spokesman said there was no question of action being taken against the firms who accepted the rebates.
"They were not the ones abusing their dominant position in the market," he added.
Last year, Intel made 80.5% of all the microprocessors in PCs, while AMD made 12%.
'Wall of resistance'
The Commission has also ordered Intel "to cease the illegal practices immediately to the extent that they are still ongoing".
In addition to providing rebates to manufacturers that bought almost entirely Intel products, the Commission found that the chipmaker had paid them to postpone or cancel the launch of specific products based on AMD chips.
Ms Kroes joked in her own news conference that Intel would now have to change its latest advertising slogan from "sponsors of tomorrow" to "the sponsor of the European taxpayer".
Both Intel and AMD are based in California. Intel has 83,900 staff worldwide and has a market value of $85.4bn.
AMD employs about 11,000 people and has a market value of $2.6bn.
"Despite its strong defence, Intel is facing a wall of regulatory resistance to its business practices around the world, with antitrust infringement decisions against it now in Japan, Korea, and the EU, while the US authorities are investigating Intel as well," said David Anderson, a lawyer at Berwin Leighton Paisner.
"It is a major decision that shows the Commission is serious about curtailing abusive behaviour of dominant companies, especially in the high-tech sector."
Technology analysts Gartner said the decision was unlikely to have any significant impact on market conditions.
"The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities," said Gartner managing vice-president Martin Reynolds.
"Intel will pay its fine and carefully inspect its sales relationships to protect against risky influence. AMD does not receive any money from the fine, which accrues to the EU tax budget. And Intel's greatest challenge will remain market growth, not market share."
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.