"The Court of First Instance essentially upholds the Commission's decision finding that Microsoft abused its dominant position," a court statement said.
Microsoft General Counsel Brad Smith was downbeat at the courtroom, promising the company would obey the ruling in full. He told reporters there was no decision yet on whether to appeal to the European Court of Justice.
"It is clearly very important to us as a company that we comply with our obligations under European law," Smith said. "We will study this decision carefully and if there are additional steps we need to take in order to comply with it, we will take them."
Microsoft, which had argued that it was entitled to protect is intellectual property from rivals, has used every recourse in every case brought against it by governments and regulators.
The company has weathered a series of defeats in antitrust cases in the last decade and sees legal setbacks as almost part of its business model and a price for its near-monopoly.
Microsoft has already moved to new battlegrounds such as seeking to set technical standards across the industry, while bundling more new features into its new Vista desktop software.
Kroes declined to discuss the implications of the ruling for a pending complaint against Vista but said the Commission would have something to say soon.
Rivals welcomed the EU court decision as a signal that authorities do not intend to allow Microsoft to pursue anti-competitive practices with impunity.
The Commission ordered the company to sell a version of Windows without the Windows Media Player application used for video and music, which few have bought, and to share information allowing rivals' office servers to work smoothly with Windows.
A spokesman for Microsoft opponents, the European Committee for Interoperable Systems, said the ruling confirmed Microsoft had abused its near-monopoly in computer operating systems and set ground rules for the company's behaviour.
Another winner was the Free Software Foundation, which makes free, open software for work group servers. "Microsoft can consider itself above the law no longer," said Georg Greve, president of the FSF Europe.
The judges ordered Microsoft to pay the lion's share of the costs of the Commission and of business rivals.
Since the original decision, the Commission has fined Microsoft a further 280.5 million euros, saying it had failed to comply with the interoperability sanction. The EU regulator is considering a further fine for non-compliance.