It has issued a formal legal warning against the US software giant, alleging it abused its power to gain an edge in the market for server software.
If Microsoft fails to satisfy the commission that its concerns are unfounded, it could face a 10% fine on its revenues. However, in practice fines have never exceeded 1%.
Microsoft has two months to respond, but issued a statement on Thursday saying it was confident it had not broken any EU laws.
"Sun's complaint is based on their desire to gain access to our technical trade secrets. We don't believe that the law requires Microsoft, or any other company, to share its secrets with direct competitors," said Microsoft Europe's legal chief, John Frank.
The European Commission move is the latest legal headache for Microsoft which is facing two other competition probes in Europe.
In separate proceedings, a US court ordered it should be split in two earlier this year.
That followed a court finding in June that Microsoft had abused its monopoly power in the market for PC operating software and had indulged in anti-competitive behaviour in its fight against browser rival Netscape.
Microsoft is currently in the process of appealing against this decision.
Sun complaint
The European Commission said it had sent a "statement of objections" to the US software giant "for allegedly abusing its dominant position in the market for personal computer operating systems software by leveraging this power into the market for server software".
Sun claims that Microsoft breached EU competition rules by engaging in discriminatory licensing and refusing to supply essential information on its windows operating system.
The European complaint differs from the US one in that the US Justice Department claimed Microsoft protected its dominance in PC operating systems through measures aimed at weakening Netscape Navigator and Sun's Java system.
The Commission hasn't come to any conclusions "but is taking the allegations of misconduct very seriously", a spokeswoman for European Competition Commissioner Mario Monti said on Thursday.
"We will not tolerate the extension of existing dominance into adjacent markets through the leveraging of market power by anti-competitive means," the Commissioner said in a statement.
"All companies that want to do business in the European Union must play by its anti-trust rules and I'm determined to act for their rigorous enforcement."