"The msn.co.il portal will continue to operate throughout the transition period and both parties are working together to support employees, advertisers, and users through this period," the companies said in a joint statement.
Internet Gold said it was ceding control of MSN Israel to Microsoft due to a change in business strategy. "We have decided recently to change course and seek alternatives for growth," said Internet Gold CEO Eli Holtzman, in a statement.
MSN Israel accounted for less than 3% of Internet Gold's revenues in 2007, according to the company.
Microsoft and Internet Gold said they are currently developing a plan under which MSN Israel's operations will migrate to Microsoft and that they are also discussing possibilities for future cooperation.
"We are very excited about our future in Israel and see some fantastic opportunities for growth and development of both the MSN portal and Windows Live services," said Danny Yamin, Microsoft's general manager for Israel, in a statement.
MSN operates in 44 countries. It's controlled by Microsoft in all but a handful of those locations.
MSN Israel was launched in 2000. Like its U.S. counterpart, it features links to popular Microsoft services such as Hotmail, Messenger, and Spaces. Most of the content, however, is rendered in Hebrew and is tailored to its Israeli audience.
On Monday, the Jerusalem Post reported that MSN Israel general manager Shraga Mor is resigning as a result of the transition. The newspaper also reported that about one-third of the portal's staff would be laid off.