The company said that users' access to Popfly accounts will be discontinued on 24 August, including any games and mashups they have created. All of the web sites, references and resources will be taken down.
"We want to thank everyone who registered for and used Popfly," said team leader John Montgomery in a blog post.
"We have been fortunate enough to see all the innovative mashups, web pages and games you've created since we launched Popfly two years ago, and it's been a pleasure to watch the spirit of creativity flow through a growing Popfly community over the life of the product."
US blog TechFlash said that Microsoft is closing the service because it no longer forms part of its new strategy in light of the recession.
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Users complain they haven't been able to access their accounts or withdraw money