Microsoft said the decision, which coincided with the launch of its redesigned MSN Web portal, was based on an AOL software bug that could pose a security risk for MSN users.
"We have now reached a point where an interim solution is no longer possible," Microsoft said in a statement. "With the release of MSN Messenger Service 2.0, Microsoft has decided it is more important to protect the security of MSN Messenger users while remaining focused on driving toward an industry standard."
Although Microsoft took pains to characterize the move as a technical decision, it could also give the company some much-needed political capital.
Microsoft foreshadowed the decision in public statements last week following a stinging court ruling in the Department of Justice's antitrust suit against the software giant.
A federal judge found that Microsoft holds a monopoly in the personal computer operating system market, a revelation that may motivate the company to tread softly in business dealings with competitors pending a final decision or settlement in the case.
The decision on interoperability for now sends to the back burner a dispute with AOL that boiled over this summer amid accusations that Microsoft was "hacking" AOL's system.
AOL reacted favorably to the announcement.
"We're happy that Microsoft has decided to respect the privacy and security of our network and our AIM users," said Tricia Primrose, an AOL spokeswoman. "We look forward to continuing to work with the industry on the issue of instant messaging."
As previously reported, Microsoft has been weighing whether to continue tapping into AOL's servers to allow MSN Messenger users to communicate with AIM users. Microsoft representatives have said it will be more difficult to keep MSN Messenger interoperable with AIM.
"We've been thinking about interoperability ever since we launched [MSN Messenger]," Deanna Sanford, lead product manager for MSN, said in a previous interview. "It's getting harder and harder to provide that interoperability."
Microsoft's allegations of an AIM security bug are not new. Earlier this year, a security expert named Richard Smith reported that he received an email claiming AIM was risking the security of its users and Microsoft's. Upon further examination, Smith discovered that the email, sent by someone claiming to be Phil Bucking from Bucking Consulting, originated at Microsoft.
Although AOL remains mum about whether its messaging software could compromise the security of its users, it was quick to criticize Microsoft.
"We will not get into how we block Microsoft to keep our service secure," AOL's Primrose said. But she added that Microsoft's security bug claims continue to be unfounded.
"It was a fake issue when Microsoft manufactured a phony consultant to make this allegation, and it's still a fake issue," Primrose said.
The two technology giants butted heads this summer when Microsoft launched MSN Messenger. Because the client allowed users to communicate with AIM users without AOL's agreement, the online giant cried foul.
AOL instituted blocks to prevent MSN users from accessing AIM. Microsoft then instituted fixes around the blockades. AOL has since resorted to sending MSN users a pop-up message before they try to tap in to AOL's servers.
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