The European Commission found that the company had broken EU law by using a strategy that shut out the competition -- thereby limiting the number of choices available to consumers -- and kept prices high.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Neelie Kroes, the EU's competition commissioner.
California-based Intel, which is a corporate sponsor of the NewsHour with Jim Lehrer, makes about 80 percent of all computer chips and faces only one other major competitor, Advanced Micro Devices, another U.S.-based company.
The commission said Intel paid computer companies and stores to not use or sell AMD products, including the largest electronics retailer in Germany. They also say Intel gave rebates to manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units from Intel and paid them to stop or delay the launch of personal computers based on AMD chips
The European investigation began in 2001 after AMD filed a complaint.
Officials said their case is largely based on e-mails and statements from businesses, some seized during surprise raids, according to the Associated Press
Intel general counsel Bruce Sewell told news agencies the case is built on "weak evidence" and regulators were drawing unfair inferences from a small number of documents.
Sewell said the firm had not yet begun talks with the Commission on how to comply with its ruling and said: "We will try to be compliant with the order."
Intel President and CEO Paul Otellini said the company would appeal at the Court of First Instance, the EU's second-highest court.
"Intel takes exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor market," he said in a statement.
AMD's European president Giuliano Meroni said the EU decision would shift power "from an abusive monopolist to computer makers, retailers and above all PC consumers."
By EU law, the fine for Intel could have been much higher -- 10 percent of the company's annual income times the number of years the company had been abusing the policy. Intel posted first-quarter sales of $7.1 billion.
The previous record for such a fine was set last year when Microsoft Corporation was charged $899 million euros for monopoly abuse. There may be more American technology companies facing fines later this year. Several are facing European inquiries, including Qualcomm, Cisco Systems, I.B.M. and Google.
This week, a top U.S. antitrust official, Christine Varney, signaled a return to tougher American domestic enforcement as the Obama administration dropped a strict interpretation of antitrust rules that saw regulators shun major action against monopolies over the last eight years.