The software giant planned to sponsor the Fox show, titled 'Family Guy Presents: Seth and Alex's Almost Live Comedy Show', on November 8 to promote its Windows 7 operating system.
As part of the deal, 'Almost Live Comedy Show' was set to run commercial-free, with Microsoft's marketing messages built into the special instead.
However, when attended the show's taping on October 16, which included the usual 'Family Guy'-style jokes, including gags about deaf people, the Holocaust and incest, the software maker became concerned about its association with such content.
Microsoft subsequently sent MacFarlane and Fox several notes expressing its concern, but evenutally decided to pull its sponsorship.
A Microsoft spokeswoman said: "We initially chose to participate in the Seth and Alex variety show based on the audience composition and creative humour of 'Family Guy', but after reviewing an early version of the variety show, it became clear that the content was not a fit with the Windows brand.
"We continue to have a good partnership with Fox, Seth MacFarlane and Alex Borstein and are working with them in other areas. We continue to believe in the value of brand integrations and partnerships between brands, media companies and talent."
Microsoft's sponsorship of the special was part of larger deal with Fox One that encompassed a range of channels, including Fox Sports, FX, , Hulu and 20th Century Fox TV. The remaining components of this marketing deal, which has been designed to promote Windows 7, will be unchanged.
Fox still plans to run the special, but with another sponsor, yet to be named.
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