No date has yet been given for when the free software will launch
Microsoft is poised to start giving away security software.
The company is reportedly trialling free anti-virus software internally and said the beta version would be released "soon".
Called Morro, the software will tackle viruses but lack the broader range of utilities, such as parental locks, found in paid-for security suites.
Morro will be Microsoft's second venture in the highly competitive security market.
Microsoft's first attempt revolved around the Windows Live OneCare service that did not succeed in turning many customers away from rivals such as Symantec and McAfee.
Microsoft plans to discontinue Live OneCare once the Morro software is ready.
No specific date has been given for when Morro will be released, but in the past Microsoft has said it would be out by the end of 2009 at the latest.
Microsoft said Morro would tackle viruses, spyware, rootkits and trojans.
Janice Chaffin, Symantec's president of consumer products, said customers wanted more than just basic protection.
"A full internet security suite is what consumers require today to stay fully protected," she said.
Security software for home PCs typically cost around £30-40 and often allow users to install protections on more than one computer.
Other companies, such as AVG and Alwil already produce and distribute free anti-virus products.
In its latest update, Microsoft added code that detects and deletes the widespread Internet Antivirus Pro family of fake security software programs.
Such programs, also known as scareware, have been proving more popular with hi-tech criminals in recent months.
The Anti-Phishing Working Group estimated that there were 9,287 bogus anti-malware program in circulation in December 2008 - a rise of 225% since January 2008.
The US government has moved to shut down some companies peddling the programs that falsely claim to find malicious software on PCs and then charge for the non-existent threats to be removed.
In addition, the Internet Antivirus Pro software displays fake Windows security messages to try and trick people into thinking the product is legitimate. The software also contains a password stealer that watches where people go online and grabs login data.