The vulnerability existed in Hotmail's password reset feature. Hackers were able to use a Firefox add-on called Tamper Data to intercept the outgoing HTTP request following a password reset request and modify the data, locking out the account holder and gaining access to their inbox.

Computer security researchers discovered the vulnerability in early April and told Microsoft about it soon afterwards. However, details of the bug leaked out in online forums, and earlier this week hackers were to break into any Hotmail account for as little as $20.

Microsoft said it has now issued an update to fix the bug.

"On Friday we addressed a reset function incident to help protect Hotmail customers, no action needed," the company posted on its Twitter account.

It is not known is just how many Hotmail accounts may have been compromised by the bug. According to some reports, Moroccan hackers were actively taking advantage of the vulnerability and planned to reset the passwords of a list of 13 million Hotmail users in their possession.