The commission had ordered Microsoft in 2004 to sell a version of its Windows platform - which runs on 95 per cent of the world's computers - without its Windows Media Player application which is used to play videos and music.
It was also ordered to share key coding information with rivals so that their office servers would work smoothly with the Windows operating system.
However, the EU imposed a second fine of $357 million against Microsoft after failed to implement the 2004 order.
"Microsoft has not demonstrated the existence of objective justification for the bundling [of Media Player with Windows] and the remedy imposed by the commission is proportionate," the court statement said.
The commission said that it "welcomed" Monday's ruling, with Jose Manuel Barroso describing it as a victory for the EU's policies towards protection of consumer rights and urging Microsoft to "comply fully" with the ruling.
Microsoft's top lawyer told AFP news agency that the company had not yet decided on its next legal step.
"[These principles] will apply to any dominant company that engages in the same behaviour - it's not just about Microsoft"
Michael Reynolds, head of antitrust, Allen and Overy
"I don't want to talk about what will come next," said Microsoft lawyer Brad Smith.
"We need to read the ruling before we make any decision."
Analysts say the implications of the ruling would have wider repercussions.
"The important thing to bear in mind is that these principles of the judgement will not just apply to Microsoft case," said Michael Reynolds, head of antitrust at Allen and Overy international legal practise.
"They will apply to any dominant company that engages in the same behaviour. It's not just about Microsoft."
The court reversed one of the commission's decisions that a monitoring trustee should be appointed to ensure Microsoft complied with the original ruling.
The court on Monday also ordered Microsoft to pay most of the legal costs of the case, including some of its business rivals' which had supported the commission's case.
Other companies supporting Microsoft's appeal were told to pay their own costs.
The ruling of the Court of First Instance on facts is final, however matters of law may be appealed to the European Union's highest court, the European Court of Justice.