The company said in a blog that "service has been restored for all users" at around 10pm (GMT) last night and that it was "taking steps to make sure this doesn't happen again". It also apologised to Hotmail users for the inconvenience but did not say what caused the problem.
Windows Live Hotmail users across the globe Twittered widely about the outage, which Microsoft said it first began hearing reports of at around 5pm (GMT).
Twitter users said they were receiving a 'server is too busy' message when they tried to log into Hotmail, which has more than 375 million active users worldwide, according to Microsoft.
The Twitter reports were so widespread that Microsoft even sent out a message on its own WindowsLive Twitter feed letting people know it was aware of the problem, and then again when the outage was repaired.
For Microsoft and Google, which are competing to bring more web-based services to consumers and businesses, email has been a proving ground for how many users their online services can support. Outages raise questions about the ability of those companies and other online service providers to maintain a consistent quality of service for end-users.