The firm is said to be working on designs for a touchscreen smartwatch, according to the Wall Street Journal.
According to the Journal, anonymous executives at suppliers said that in early 2013, Microsoft asked Asian suppliers to ship parts for a potential watch-style device, the executives said.
One source added that he had a meeting with Microsoft's research and development team at its Redmond, Wash. Headquarters, Mashable reports.
According to the report, rumors that Microsoft's competitors are developing smartwatches have also swirled online.
Sources inside Apple's Cupertino, California headquarters confirmed in February that the company is working on a wristwatch made with curved glass.
A Samsung executive said last month that the Korean electronics giant has been "preparing the watch product for so long."
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