The State Administration for Industry and Commerce sent its investigators to the company's offices in Beijing, Shanghai, Guangzhou and Chengdu for an official investigation, Hong Kong-based South China Morning Post reported.
It is unclear why the company is being looked into, it said.
Microsoft China spokeswoman Joan Li confirmed that the company was being investigated and said it would "actively cooperate" with the government.
She did not specify what the investigation was about, the Post report said.
In late May, China announced it would ban government use of Windows 8, Microsoft's latest operating system mostly due to suspicions about cloud technology which stores key information elsewhere.
The state-run broadcaster CCTV also aired a strongly critical programme in which experts suggested Windows 8 was being used to grab information on Chinese citizens.
Experts said the operating system posed a "big challenge" to China's cybersecurity efforts.
They also suggested that Windows 8 was one of the methods that the United States' National Security Agency was using to spirit data out of China, the report said.
Chinese officials have previously stressed that Microsoft should lower the price of Windows.
But the Chinese government continued to be a major Microsoft customer.
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