The technology giant has been in discussion with a number of landlords in the UK, with its first outlets expected to open next year.
Microsoft already has more than 50 retail stores in the US, Canada and Puerto Rico, selling devices such as its Xbox console and Surface tablet.
The move into retail comes shortly after Microsoft's chief executive hinted that it would be making a greater hardware play earlier this month, following the launch of its first tablet device.
Last week, reports emerged about Microsoft's plans to build a set-top TV Box next year, dubbed ‘Xbox TV’, to compete with Apple TV.
A move into retail stores would mirror Apple, which has used its stores to sell its devices.
Microsoft did not respond to a request for comment on the report at the time of publication.Follow @shearmans