Google is developing an operating system (OS) for personal computers, in a direct challenge to market leader Microsoft and its Windows system.

Google Chrome OS will be aimed initially at small, low-cost netbooks, but will eventually be used on PCs as well.

Google said netbooks with Chrome OS could be on sale by the middle of 2010.

"Speed, simplicity and security are the key aspects of Google Chrome OS," the firm said in its official blog.

The operating system, which will run on an open source licence, was a "natural extension" of its Chrome browser, the firm said.

The news comes just months before Microsoft launches the latest version of its operating system, called Windows 7.