It could be because of couple of Browser settings. Try with these options checked..
Tools > Internet Options > Advanced > Enable Integrated Windows Authentication (works with Integrated Windows Authentication set on IIS)
Tools > Internet Options> Security > Local Intranet > Custom Level > Automatic Logon
Worst case, try adding localhost to the Trusted sites.
If you are in a network, you can also try debugging by getting a network trace. Could be because of some proxy trying to authenticate.