Azure AD Domain Services Cloud only user passwords

I have been creating a Windows Virtual Desktop (WVD) environment for internal testing. I’ll be sharing the process and tricks soon but this issue was one that I really didn’t know about for Azure AD Domain Services until someone pointed it out to me.  I am eternally grateful to gerry_1974 on the Microsoft Tech Community for this information that lead to the resolution. I thought I’d also share it here so others can avoid the oversight I made and prevent getting as frustrated as I did.

I recently wrote about setting up Azure AD Domain services for a cloud only environment

Moving to the Cloud – Part 3

The reason I needed to do this was to support my planned “cloud only” WVD test environment. Azure AD Domain Services is basically designed to create an ‘old style’ domain that WVD host machines connect to. That will change down the track, but for now WVD needs a traditional AD. Since I did not have an existing on premises domain, I planned to use Azure AD Domain Services.

After getting things working eventually (more about that soon), I was able to successfully login to my WVD environment with a user who didn’t have Multi Factor Authentication (MFA) enabled. I then tried a user with MFA and received:


The remote computer that you are trying to you are trying to connect to requires Network Level Authentication (NLA), but your Windows Domain controller cannot be contacted to perform NLA. if you are an administrator on the remote computer, you can disable NLA by using the options on the Remote tab of the System Properties dialogue box.

I put the issue down to being about MFA but as it turned out, I was so wrong!

When you have cloud only users with Azure AD Domain Services, no password hashes in a format that’s suitable for NT LAN Manager (NTLM) are automatically generated! To force this generation for cloud only users, it is required that the cloud only user change their password per:

Enable user accounts for Azure DS

which says:

The steps to generate and store these password hashes are different for cloud-only user accounts created in Azure AD versus user accounts that are synchronized from your on-premises directory using Azure AD Connect. A cloud-only user account is an account that was created in your Azure AD directory using either the Azure portal or Azure AD PowerShell cmdlets. These user accounts aren’t synchronized from an on-premises directory.

and most importantly:

For cloud-only user accounts, users must change their passwords before they can use Azure AD DS. This password change process causes the password hashes for Kerberos and NTLM authentication to be generated and stored in Azure AD.

After having this brought to my attention, I understand why this is but would also say this could be a very painful process if you have a lot of users that are wanting access to something like WVD.

Thus, another little configuration tip to remember if you are setting up a cloud only environment that utilises Azure AD Domain Services. Before users can potentially use services that are dependent on Azure AD Domain Services (like Windows Virtual Desktop) they need to change their password so the NTLM password hash can be generated for use by Azure AD Domain Services.