Microsoft has been told it must ensure its new computer security plan doesn't shut out competitors.
New EU anti-trust enforcer Philip Lowe says Palladium must be compatible with other operating systems.
Microsoft unveiled its ambitious project to foil virus-writers and hackers last week.
The aim is to create a secure repository within PCs, using encryption software and custom-made chips.
Mr Lowe says Microsoft will have to "ensure that competitors have the capacity to offer the range of services they want to provide."
He is due to start work as the EU's Director General for Competition on September 1.
A Microsoft official, speaking on condition of anonymity, said work on Palladium was still in its infancy, but it wouldn't prefer Microsoft's operating system over competing software.
He added that hardware specifications for Palladium chips would be fully disclosed so other software makers could use it.
European officials already have an anti-trust investigation pending against Microsoft, focusing in part on whether Microsoft has illegally changed commonly-used industry standards in order to shut out competitors.
Their decision won't be made until after matters are concluded in the US. Decisions to approve Microsoft's settlement with the Justice Department and on nine states' calls for harsher penalties are expected later in the summer.