The move puts the technology giant on delicate terrain as it tries to lure people into trusting sensitive health information will be secure on an Internet prowled by hackers, scammers and data miners.
It also gives Microsoft a rare jump on rival Google, which is planning to expand its empire with an online health management service of its own.
Microsoft's HealthVault lets people stockpile records such as blood tests, vaccinations and medical history and control access to select portions of the data to health care providers.
The permission of account holders is required for data transfers, and contracts with advertisers preclude "mining" the service for information.
Audits of HealthVault privacy protection performance will be conducted by an independent outside party, according to Microsoft.
"Audits are essential," said PatientPrivacyRights.Org founder Dr. Deborah Peel.
"Technology companies have got to do better than telling consumers to just 'trust us.' Consumers shouldn't trust anyone but themselves to decide who can see and use their sensitive health information."
Peel said Microsoft worked closely with her group and "set a new standard" for handling personal medical records online.
HealthVault is tied to a health-focused search service unveiled last week by Microsoft.
"Our focus is simple: to empower people to lead healthy lives," said Microsoft health solutions group vice president Peter Neupert.
Web-based medical information services are big business, and increasingly US residents are going online to piece together their health puzzles.
An impediment is that only a fifth of US patients have computerized rather than paper medical records. Control of the information is tightly held by health care providers and insurance companies.
The administration of US President George W. Bush is calling for the health care industry to quickly go digital when it comes to patient care records.
In the past two years there was a 37 percent rise in US residents turning to the internet for health information; with the average climbing to six times per month, according to recent survey research by Harris Interactive.
Internet giant Google recently invested 3.9 million dollars in 23andMe, a biotech firm promising "new ways to help you make sense of your own genetic information."
Google co-founder Sergey Brin married 23andMe founder Anne Wojcicki earlier this year.
Google also formed a health advisory group to tap into the expertise of physicians and researchers at RAND, HealthTech, and the American Medical Association.
"We are very interested in helping users access their health information online," Gabriel Stricker, Google spokesperson told AFP.
Google is working on a product that will combine personal health history and refined search capabilities.
Users will be able to upload medical records to personal profiles, connect securely to websites tailored to their medical needs, and receive updates of information relevant to profiles.
Screenshots of the Google Health prototype, recently leaked to an industry blog, reveal the familiar streamlined interface, with a "profile" tab including fields for symptoms and conditions, medications, allergies, and family history.
Critics think the public should be wary about sharing personal health records with a corporate heavyweights.
"Like much of what Google and Microsoft do, they are covering their activities with a digital halo when really it is just an elaborate marketing scheme," Center for Digital Democracy director Jeffrey Chester told AFP.
"Pharmaceuticals are already a key product category for Google, and I am very concerned about people giving up their personal information to companies whose business is to sell access to individuals to the highest bidder."