The FTC is concerned the deal would crush competition by denying rivals access to popular games.
Microsoft, which owns the Xbox, said in January 2022 it would buy Activision in what would be the biggest gaming industry takeover in history.
Microsoft is betting on this takeover to help it compete better with video game leaders Tencent and Sony.
In its complaint, the FTC, which enforces antitrust law, said that Microsoft had a record of buying valuable gaming content and using it to suppress competition from rival gaming consoles.
Microsoft's president Brad Smith vowed to fight the FTC in court.
The deal is also facing scrutiny outside the U.S., the E.U. opened an investigation in November and Britain's antitrust watchdog announced in September it would do the same.
The complaint comes as the Biden administration has taken a more aggressive approach to antitrust enforcement.
The U.S. Department of Justice recently stopped a $2.2 billion merger of the world's largest book publisher Penguin Random House and its smaller rival Simon & Schuster.
