The talks are at an advanced stage, but Foursquare is also talking to other potential partners, the report said of the company whose users can "check in" to locations they are visiting and share relevant tips.
"This falls squarely in the "rumors and speculation" category," Foursquare spokesman Brendan Lewis said via email.
A Microsoft spokesman declined to comment.
Foursquare was a start-up darling three years ago. But as social networking companies have come under increased scrutiny, particularly since the initial public offering of Facebook Inc, Foursquare has lost some of its luster, many investors around Silicon Valley have said.
Foursquare has raised a total of $112 million, including a $41 million convertible debt round in April.