Allen left Microsoft in 1983 and is the founder and chairman of Vulcan and the chairman of Charter Communications.
He has non-Hodgkin's lymphoma, said reports citing a letter to employees of Vulcan from Allen's sister and chief executive of the company, Jody Allen.
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She said her brother had started chemotherapy after being diagnosed with diffuse large B-cell lymphoma earlier in the month.
"Paul is feeling OK and remains upbeat. He continues to work and he has no plans to change his role at Vulcan," she said.
Allen survived an earlier bout of cancer 25 years ago, his sister said.