Microsoft disclosed in a statement that China is investigating the company in an antitrust probe after China government officials paid unexpected visits to the software firm’s offices.
Representatives from China's State Administration for Industry and Commerce, which is responsible for enforcing business laws, made the visits to Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu.
In a statement released by Microsoft the company said it was working with officials, ”We will actively cooperate with the government department's investigation and answer related questions."
The Chinese government agency declined to comment on the visits.
A source close to the company said the visits were most likely the preliminary stage of an antitrust investigation.
If that is the case, Microsoft would be one of the biggest US companies to fall under the eye of Chinese regulators as they ramp up their oversight in an apparent attempt to protect local companies and customers.
Chip maker Qualcomm is facing penalties that may exceed $1 billion in a similar Chinese antitrust investigation, following accusations of overcharging and abusing its market position.
Beijing's increasing use of its anti-monopoly law and price competition rules to weigh-in on global mergers has strained US-China business relations.
The US Chamber of Commerce earlier this year urged Washington to get tough with Beijing on its use of anti-competition rules, noting "concerns among US companies are intensifying."
US-China business relations have been severely strained recently by wrangles over data privacy. State media has called for "severe punishment" against tech firms for helping the US government to steal secrets and monitor China, in the wake of revelations by Snowden.
Tensions increased in May when the US Justice Department charged five Chinese military members with hacking the systems of companies to steal trade secrets.
The latest move by China's authorities caps a rocky period for Microsoft in the country. Earlier this month, activists said Microsoft's OneDrive cloud storage service was being disrupted in China.
In May, central government offices were banned from installing Windows 8, Microsoft's latest operating system, on new computers.