Outlook: Windows 7 cannot connect to Exchange Server. But Hey, OWA works just fine.

This issue is interesting. Some Windows 7 computers refused to connect to Exchange server. User is able to use Outlook Web App to check emails.

After some research, I found LmCombatibilityLevel registry key (which is explained here: http://technet.microsoft.com/en-us/library/cc960646.aspx). By default it supposed to set to 0.

The value zero means,

Clients use LM and NTLM authentication, but they never use NTLMv2 session security. Domain controllers accept LM, NTLM, and NTLMv2 authentication.

The key is highlighted above. I believe Exchange 2010 and Windows 2008 R2 domain use NTLMv2 by default. But how come the default settings is ZERO. The setting 1 makes lots of sense. And changing to 1 resolved my issue. Here is how you resolve the issue if you are facing the same issue.

1. Open Registry Editor by running Regedit.exe.
2. Browse to HKEY_LOCAL_MACHINE >>> SYSTEM >>> CurrentControlSet >>> Control >>> Lsa 
3. Right click on the right side window, Click New > DWORD (32-bit) Value, type the name LmCompatibilityLevel  and press Enter.
4. Double click on LmCompatibilityLevel key and add the value as 1.Click OK.
5. Close Registry Editor and Reboot the computer.

Your Outlook should be working now. If not you are facing some other issue.