In a hard-fought victory for Microsoft, a federal judge yesterday approved the company's antitrust settlement with the Justice Department and rejected virtually all of the stiffer sanctions sought by a coalition of state attorneys general. The ruling brought at least a temporary close to the landmark case filed nearly five years ago.

''While putting new responsibilities on Microsoft, this settlement also gives us the freedom to keep innovating for our customers,'' Microsoft's chairman, Bill Gates, said at a news conference at the company's headquarters in Redmond, Wash. ''We're pleased to put another step of this case behind us.''

Judge Colleen Kollar-Kotelly of Federal District Court in Washington did impose some new obligations on Microsoft that were not included in the settlement last November, requiring the software maker to disclose more information to competitors about its Windows operating system and to install a compliance committee made up of Microsoft board members.

But taking a narrow view of the case, the judge imposed few new restrictions that would slow Microsoft's aggressive push into new markets. [News analysis, Page C1.]

She largely dismissed the contention by nine states that broader restrictions on Microsoft were necessary to restore competition in the computer software industry. Instead, Judge Kollar-Kotelly criticized the states for suggesting that Microsoft should be punished for actions beyond those a federal appeals court found it liable for last year.

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''This suit, however remarkable, is not the vehicle through which plaintiffs can resolve all existing allegations of anticompetitive conduct which have not been proved or for which liability has not been ascribed,'' Judge Kollar-Kotelly wrote. [Excerpts, Page C4.]

The Justice Department, which along with nine other states settled the case last November, hailed the decision as a victory for consumers. Attorney General John Ashcroft said the ruling ''will allow the approved settlement to provide certainty and stability in a vital sector of America's economy.''

But for many of the economists, legal scholars and rival software developers who have been involved in the long-running case, the judge's decision falls far short of preventing Microsoft from abusing its market power in the future.

''We urged the court to look ahead, to expand the doctrine into new business areas,'' said Bill Lockyer, the California state attorney general who helped lead and finance the states' challenge after the federal settlement. ''The court said, 'I can't do that, if you want that you need to file a new lawsuit.' That obviously remains an option.''

The long-anticipated ruling on how the court would restrict Microsoft's behavior comes more than a year after a federal appeals court found that Microsoft had repeatedly violated antitrust laws. The case has been widely viewed as the most important antitrust action since the government's attack on Standard Oil at the turn of the last century.

When it was announced last November, the Bush administration's consent decree in a case that it inherited from its predecessor was widely viewed by competitors and antitrust scholars as an ineffective slap on the wrist. The settlement gives computer makers greater freedom to feature rival software on their machines and prohibits Microsoft from retaliating against those who choose non-Microsoft products.

In a nod to the dissenting states, Judge Kollar-Kotelly ordered Microsoft to refrain from ''threatening'' retaliation as well. And in what could be a significant step, she allowed that the restrictions on Microsoft should apply to the server operating systems that are central to most business networks, in addition to personal computer operating systems.

Still, she granted almost none of the core proposals the states raised during an eight-week trial last spring.

''I'm sort of stunned by it,'' said Andrew Gavil, an antitrust law professor at Howard University who has been critical of the Justice Department settlement. ''I can't imagine a more sweeping victory for the approach that the government and Microsoft took and the states couldn't get less out of it than they did.''

Microsoft has long argued that it needs to be free to construct its software however it sees fit,'' Mr. Gavil said. ''She bought into Microsoft's longstanding argument that there was very little relation between Microsoft's anticompetitive acts and their dominant position.''

He said there was not much room for an appeal, and that it would be ''very difficult to convince the court of appeals that she abused her discretion.''

The dissenting states had argued that the court should impose sanctions that would prevent the company from abusing its market power in new areas of technology as well as blocking the specific illegal practices identified by the appeals court.

They asked for greater disclosure of Microsoft's code to allow rival software to work better with Windows. They also wanted Microsoft to provide a pared-down version of Windows that would make it easier for competitors to supply programs like Internet browsers and e-mail software. And they asked for the company to publish the source code for its Internet Explorer browser, which zoomed ahead of Netscape's onetime dominant Navigator browser partly as a result of Microsoft's illegal acts.

The federal appeals court found that Microsoft had illegally maintained its monopoly on Windows through a series of acts that thwarted Netscape and Java, a programming language developed by Sun Microsystems. Together, the court said, they could have evolved into a threat to Microsoft's operating system because software developers could write applications to run on them as a ''platform'' much in the same way that they do for Windows.

That was the basis for one of the states' key proposals: that Microsoft deliver a stripped-down version of its software with some features removed. But the judge said that Microsoft only needed to remove the icon that users see on their computer screen, rather than the underlying computer code that software developers write to. The states had argued that the field would not be any more level for competitors unless the code itself were removed.

The states advocating tougher penalties are California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, West Virginia and Utah, along with the District of Columbia.

But at least one Microsoft competitor voiced enthusiasm for Judge Kollar-Kotelly's decision. RealNetworks said the judge's requirement that Microsoft allow competing programs to start automatically when a computer is booted up could be a useful edge for the company's audio and video playback software. That obligation goes beyond what was required of the company in the settlement.

After the ruling was announced, Microsoft shares rose $3.33, to $56.33, in after-hours trading.

The proceedings before Judge Kollar-Kotelly were set in motion when the appeals court threw out the decision by the lower court judge, Thomas Penfield Jackson, to break the company in two. The court also removed Judge Jackson, who had made public comments on the case that the appeals court judges found inappropriate.

Judge Kollar-Kotelly was assigned to carry out the strict instructions laid out in the appeals court decision. Microsoft, the court said, should be punished for illegally using its monopoly on the PC operating system to crush threats from Netscape Communications' Web browser and Sun Microsystems' Java programming language.

The judge was to fashion a remedy that would prevent Microsoft from repeating the violations, deprive it of the fruits of its misdeeds, and foster competition in the market for personal computer operating systems. Some legal scholars said the carefully crafted appeals court decision directed the judge to take a narrow view of how to restrain Microsoft. ''The remedy the plaintiffs were seeking went beyond what was shown and adjudicated at trial,'' said Alan Meese, a law professor at the College of William and Mary specializing in antitrust. ''She said, 'I'm not going to use this as an occasion to set up the court as a micromanager of Microsoft's business practices,' and given the law I think that was the right thing.''

Judge Kollar-Kotelly did note that Microsoft ''has a tendency to minimize the effects of its illegal conduct'' and had showed a ''paternalistic view'' toward consumers. But the judge agreed with Microsoft that most of the states' proposals went beyond the company's misdeeds, and that they would mostly benefit Microsoft competitors.

Microsoft also faces lawsuits by AOL Time Warner and Sun and an antitrust inquiry by the European Union, which is expected to issue a preliminary ruling soon.

The states said their efforts had strengthened the accord, most notably by forcing Microsoft to appoint three members if its board -- not former employees of the company -- to oversee the company's implementation of the settlement.

''We have taken the settlement to a higher and better level,'' said the Connecticut attorney general, Richard Blumenthal. ''We can be very proud of improving the settlement in ways that that protect the public interest.''

The judge also gave herself a prominent role in continuing to oversee the company's compliance with the settlement.

Quoting Machiavelli's ''The Prince,'' the judge said, ''Let it not be said of Microsoft that 'a prince never lacks legitimate reasons to break his promise,' for this court will exercise its full panoply of powers to ensure that the letter and spirit of this remedial decree are carried out.''

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