Azure Active Directory (AAD) Domain Services is a Managed Domain Service that allows you to use on-premises AD credentials, to connect to your resources in Azure, without installing and maintaining additional identity infrastructure in the cloud.


Some of the features, AAD Domain Services provides are Domain join, Domain Authentication using NTLM/Kerberos Authentication and Group Policy.

To setup AAD Domain Services, follow the five steps below -

1) Create a Group called ‘AAD DC Administrators’ in Azure AD.

The members of this group are granted administrative privileges on machines joined to the Azure AD Domain. Set the group type of this group to ‘Security’.


2) Create a classic Virtual Network

Azure AD Domain Services is not supported in Azure Resource Manager, so we have to create a virtual network and subnet in the Azure classic portal to enable Azure AD Domain Services.


3) Enable Azure AD Domain Services in the Classic Portal

Click Active Directory in the Classic Portal and select the ‘Configure’ tab. Scroll to Domain Services and change the setting from ‘No’ to ‘Yes’ and select a DNS name of this managed domain service and the virtual network we created earlier.


4) Set the DNS server of the Virtual network

After enabling Domain Services, two IP Addresses will be displayed under Domain Services. Note this down and add this as a DNS Server in the virtual network configuration under Networks.


5) Enable synchronization of credential hashes to AAD

Run the following PowerShell script after replacing the relevant connector names below. To find the connector names, open Synchronization Services on the AD Connect Server and click the connectors tab.

AD CONNECTOR NAME is the connector of Type ‘Active Directory Domain Services’.

AAD Connector Name is the connector of Type ‘Windows Azure Active Directory (Microsoft).

Import-Module adsync
$c = Get-ADSyncConnector -Name $adConnector
$p = New-Object Microsoft.IdentityManagement.PowerShell.ObjectModel.ConfigurationParameter Microsoft.Synchronize.ForceFullPasswordSync, String, ConnectorGlobal, $null, $null, $null
$p.Value = 1
$c = Add-ADSyncConnector -Connector $c
Set-ADSyncAADPasswordSyncConfiguration -SourceConnector $adConnector -TargetConnector $aadConnector -Enable $false
Set-ADSyncAADPasswordSyncConfiguration -SourceConnector $adConnector -TargetConnector $aadConnector -Enable $true

Once this is complete, users can sign into computers joined to the managed domain using their Azure AD credentials.


Since Azure AD Domain Services is not supported in Azure Resource Manager yet, a big challenge is setting this up with Azure Resource Manager (ARM) virtual machines. To accomplish this, we have to set a VPN connection between the Classic Network in which Azure AD Domain Services is enabled and the Azure RM Network.