The flaw, which allegedly affects IE Versions 5.5 to 6, was first reported to the company by ThePull, an independent security research organisation.
The vulnerability is the result of Microsoft's failure to abide by an industry-standard browser security rule known as the "same-origin policy," said David Ahmad, moderator of BugTraq, a popular mailing list on which ThePull first posted details of the vulnerability.
The same-origin policy was established to prevent malicious Web sites from interacting with and stealing sensitive information left in cookies set by other sites on a user's computer. In other words, when one Web site is used to open another Web site in a separate pop-up window, script code from the first site should not be able to affect the information or properties of the other site.
In an e-mail to Computerworld, a spokesman for Microsoft's Security Response Centre said the company is investigating the issue "just as we do with every report we receive of security vulnerabilities affecting Microsoft products."
"At this point in the investigation, we feel strongly that speculating on the issue while the investigation is in progress would be irresponsible and counterproductive to our goal of protecting our customers' information," the spokesman said.
Microsoft also criticised the manner in which the information was made public.
"We are concerned that this report has gone public before we've had a fair chance to investigate it. Its publication may put our customers at risk, or at the very least cause customers needless confusion and apprehension," the spokesman said.
Microsoft's current practice when it comes to vulnerability disclosures is to first come up with a fix before releasing details of a problem or confirming that one exists.
Even so, said Ahmad, Microsoft's failure to abide by the industry standard in recent versions of IE has resulted in a severe security vulnerability for users.
"If you use the document write method in the correct manner as stated by Microsoft's own documentation, you are able to spoof sites, read cookies from other sites and read local files on a user's system," said ThePull in an e-mail.
"This means, for instance, that someone could send you an e-mail from email@example.com to download an important update with a link. Upon clicking that link, you could be brought to a Web page with a Trojan [horse] on it," ThePull said.