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The proposal comes after the two parties resumed talks earlier this month aimed at resolving the EC's objections to Microsoft bundling IE with its operating system.
In 2004, the EC was successful in its monopoly abuse case against Microsoft for linking its media player to Windows, fining the software maker €497m (£430m).
The EC has threatened sanctions if it fails to reach an agreement with Microsoft, which has been accused of harming browser competition with its bundling practices.
Microsoft has proposed offering buyers of its new Windows 7 operating system a choice of browsers to install and the option of disabling Internet Explorer.
PC makers will also be able to install competing web browsers and disable IE.
Lawyers for Microsoft believe the proposal will fully address the European concerns about harming browser competition, according to the BBC.
European authorities have welcomed the proposal, but said they would investigate how effective the move will be in ensuring genuine consumer choice.
The EC is also investigating Microsoft proposals about disclosing information to achieve better interoperability between its operating system and third-party products.
Microsoft said it would continue shipping a version of Windows 7 in Europe without Internet Explorer until authorities made a decision about the latest proposals.