The EU has accepted Microsoft's 'ballot screen' offer, which will allow Windows users to choose the web browser they want, ending the commission's antitrust investigation.
The company will offer users of Windows XP, Windows Vista and Windows 7 a choice screen through which they can pick the browsers they want to install on their PC.
The screen will be offered to users in the European Union and some neighboring countries for the next five years via the Windows Update mechanism.
In addition, PC manufacturers will be allowed to ship computers with competing web browsers, as well as or instead of Internet Explorer.
The Commission informed Microsoft of its objections to the company's practice of tying Internet Explorer to its Windows operating systems on January 15 this year.
By exploiting its dominant position in the operating system market, Microsoft prevented other software browsers from competing on their merits.
However, the commission said the new choice screen will enable such competition.
Now that the commission has accepted Microsoft's proposal, it becomes legally binding.
If Microsoft fails to deliver, it could face a fine of up to 10 percent of its worldwide turnover, under EU antitrust law.
The commission will review the situation regularly to ensure that the choice screen is achieve the desired result, and may require Microsoft to make changes, it said.
Jon von Tetzchner, CEO of Opera Software, which filed the complaint that started the investigation, said: "This is a victory for the future of the web. This decision is also a celebration of open standards, as these shared guidelines are the necessary ingredients for innovation on the web".