China-based hackers have gained access to the email accounts of around 25 organisations, including government agencies, Microsoft says.
The software giant has not provided details of where the government agencies are based.
However, the US Department of Commerce has confirmed to the BBC that Microsoft notified it about the attack.
Secretary of Commerce Gina Raimondo was among the individuals impacted by the breach, according to reports.
"Microsoft notified the Department of a compromise to Microsoft's Office 365 system, and the Department took immediate action to respond," a US Department of Commerce spokesperson told the BBC.
US media reported that the State Department had also been targeted by the hackers.
The State Department did not immediately respond to a BBC request for comment.
China's embassy in London told the Reuters news agency that the accusation was "disinformation" and called the US government "the world's biggest hacking empire and global cyber thief."
Microsoft said the China-based hacking group - which it refers to as Storm-0558 - had accessed email accounts by forging digital authentication tokens required by the system. The tokens are typically used to verify a person's identity.
"Storm-0558 primarily targets government agencies in Western Europe and focuses on espionage, data theft, and credential access," the firm said.
The company said its investigations found that the breaches began in the middle of May and that it has now "mitigated the attack and have contacted impacted customers."
"We added substantial automated detections for known indicators of compromise associated with this attack... and we have found no evidence of further access," it added.
In May, Microsoft and Western spy agencies said Chinese hackers had used "stealthy" malware to attack critical infrastructure on American military bases in Guam.
Experts said it was one of the largest known cyber espionage campaigns against the US.
A key US military outpost, Guam's ports and air bases would be crucial to any Western response to a conflict in Asia.
Beijing called the Microsoft report "highly unprofessional" and "disinformation".
China routinely denies involvement in hacking operations regardless of the available evidence or context. Earlier this week, the FTC's request to block the takeover was rejected by a district judge in San Francisco.
The technology giant's deal to buy the Call of Duty maker would be the biggest of its kind in gaming industry history.
Microsoft said it planned to fight the regulator's appeal.
"We're disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward," Microsoft President Brad Smith said in a statement.
The FTC has alleged that the deal would hurt gamers and reduce competition by giving Microsoft, the maker of the Xbox, power to deny rivals access to Activision's games.
The FTC had sought an emergency ruling to block the deal while it challenged the planned takeover.
On Tuesday, US District Judge Jacqueline Scott Corley said she did not think the FTC would win in its case.
She said the regulator had not shown that "the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets".
The ruling in the US is the strongest indicator so far that Microsoft's purchase would eventually go forward.
Also this week, the UK's competition regulator appeared to ease its opposition to the deal.
The Competition and Markets Authority (CMA) was the world's first regulator to block Microsoft's proposed takeover of Activision.
It had been concerned that the deal would reduce innovation and leave gamers with fewer choices.
On Wednesday, the CMA said it was "ready to consider any proposals from Microsoft to restructure the transaction".
"Microsoft and Activision have indicated that they are considering how the transaction might be modified, and the CMA is prepared to engage with them on this basis," it added.
The Microsoft-Activision deal, which is due to close later this month, has split global watchdogs.
EU regulators have approved the deal, saying that Microsoft had addressed their concerns on competition issues.
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