Microsoft is paying a well-known hacking expert more than US$100,000 (A$106,000) for finding security holes in its software, one of the largest such bounties awarded to date by a high-tech company.

The software maker also released a much anticipated update to Internet Explorer, which it said fixes a bug that made users of the world's most popular browser vulnerable to remote attack.

James Forshaw, who heads vulnerability research at London-based security consulting firm Context Information Security, won Microsoft's first US$100,000 bounty for identifying a new "exploitation technique" in Windows, which will allow it to develop defenses against an entire class of attacks.

Forshaw earned another US$9400 for identifying security bugs in a preview release of Microsoft's Internet Explorer 11 browser, Katie Moussouris, senior security strategist with Microsoft Security Response Center, said in a blog.

Microsoft unveiled the reward programs four months ago to bolster efforts to prevent sophisticated attackers from subverting new security technologies in its software, which runs on the vast majority of the world's personal computers.

Forshaw has been credited with identifying several dozen software security bugs. He was awarded a large bounty from Hewlett-Packard for identifying a way to "pwn," or take ownership of, Oracle's Java software in a high-profile contest known as Pwn2Own (pronounced "pown to own").

Microsoft also released an automatic update to Internet Explorer on Tuesday afternoon to fix a security bug that it first disclosed last month.

Researchers say hackers initially exploited that flaw to launch attacks on companies in Asia in an operation that the cybersecurity firm FireEye has dubbed DeputyDog.

Marc Maiffret, chief technology officer of the cybersecurity firm BeyondTrust, said the vulnerability was later more broadly used after Microsoft's disclosure of the issue brought it to the attention of cyber criminals.

He is advising computer users to immediately install the update to Internet Explorer, if they do not have their PCs already set to automatically download updates.

"Any time they patch something that has already been used (to launch attacks) in the wild, then it is critical to apply the patch," Maiffret said.

That vulnerability in Internet Explorer was known as a "zero-day" because Microsoft, the targeted software maker, had zero days notice to fix the hole when the initial attacks exploiting the bug were discovered.

In an active, underground market for "zero day" vulnerabilities, criminal groups and governments sometimes pay US$1 million or more to hackers who identify such bugs.