Office 365 - Hybrid Wizard Fails Due To " 407 Proxy Authentication"



Recently ran into a problem when running the Hybrid Configuration wizard for Exchange that gave me the following error:

ERROR : System.Management.Automation.RemoteException: Federation information could not be received from the external organization.
ERROR : Subtask NeedsConfiguration execution failed: Configure Organization Relationship
Exchange was unable to communicate with the autodiscover endpoint for your Office 365 tenant. This is typically an outbound http access configuration issue. If you are using a proxy server for outbound communication, verify that Exchange is configured to use it via the "Get-ExchangeServer –InternetWebProxy" cmdlet. Use the "Set-ExchangeServer –InternetWebProxy" cmdlet to configure if needed.


I immediately knew that it had something to do with our WPAD Configuration, and proxy settings.  However I checked as the administrator and the proxy wasn't being used.  My initial reaction was to just bypass the proxy via rule for Exchange Server.   However a quick google search and some trial and error and found the following two options:

  1. Using your own profile, disable your "Automatically detect settings" and then export the registry key from HKCU.
    1. import to the “Local System” (HKEY_USERS\.DEFAULT) hive.  HKCU\Software\Microsoft\Windows\CurrentVersion\Internet Settings\Connections
  1. Use a utility like “PsExec” to launch Internet Explorer as “Local System”, disable the setting and save the changes.
    1. psexec.exe -i -s -d "C:\Program Files\Internet Explorer\iexplore.exe"