The service failure comes weeks after Microsoft offered customers a 25% discount on their bills after a three-hour outage in August.
The latest outage started in the middle of the night in the UK, when "Microsoft became aware of a Domain Name Service (DNS) issue causing service degradation for multiple services", a spokesperson said.
The outage affected Microsoft's Office 365, its Live email and online storage systems, and, according to reports, its Azure cloud system.
Services started to be restored after about two hours, and the problem has been fully fixed, Microsoft said - without giving any details about the actual cause.
"We are conducting a review of the incident,” the company said, although reports suggest a massive power outage in the US could have caused the problem.
The outages raise concerns about the reliability of cloud services, following downtime last month from Amazon's elastic compute cloud, which took services offline for up to two days.
This article originally appeared at pcpro.co.uk