The decision on Thursday threatens fines of up to two million euros ($2.37 million) a day if the software giant does not meet the antitrust demands.
In response, Microsoft said that the EU Commission and a trustee monitoring the case had failed to take proposals it made last week fully into account before taking the action. It said that it would contest the measure under EU law.
The EU head office insists that Microsoft provide better documentation so its programs can be used with competitors' products. It gave Microsoft until 25 January to answer the complaint.
Neelie Kroes, the EU antitrust commissioner, said: "I have given Microsoft every opportunity to comply with its obligations. However, I have been left with no alternative other than to proceed via the formal route to ensure Microsoft's compliance."
Microsoft said that its latest offer and its response to EU concerns should have been assessed first.
Brad Smith, Microsoft's general counsel, said in a statement: "In the interest of due process, we think it would have been reasonable for the commission and the trustee at least to read and review these new documents before criticising them as being insufficient."
Brad Smith: Microsoft has done
its utmost to satisfy the ruling
The EU said it was also investigating the royalties Microsoft would charge for using its software information and said another legal challenge might be issued if it was unhappy with the financial demands.
To back its claim, the EU Commission on Thursday issued a formal "statement of objections", a measure that could lead to the hefty daily penalties that would be backdated until 15 December.
The EU Commission said it based its decision on a report of the monitoring trustee of the 2004 agreement, which said that competitors seeking to operate with Microsoft software "would be wholly and completely unable to proceed on the basis of the documentation".
It quoted the report as saying that "the technical documentation is therefore totally unfit at this stage for its intended purpose".
The report further stated that "the documentation appears to be fundamentally flawed in its conception, and in its level of explanation and detail. ... The documentation needs quite drastic overhaul before it could be considered workable".
The EU ordered Microsoft in March 2004 to pay 497 million euros ($613 million), share code with rivals and offer an unbundled version of Windows without the Media Player software for what it saw as an abuse of its dominant position in the industry.
The Court of First Instance, the EU's second-highest court, has not yet set a date to hear Microsoft's appeal.
Microsoft has five weeks to
react to the EU's latest ruling
Microsoft has five weeks to react to Thursday's statement of objections and may have an oral hearing with antitrust authorities.
The company claimed that it had already done its utmost to live up to the conditions of the ruling.
Smith said: "We've shipped a new version of Windows, we've paid a historic fine, and we've provided unprecedented access to Microsoft technology to promote inter-operability with other industry players. In total, we have now responded to more than 100 requests from the commission."