Microsoft Copilot and Entra ID authentication: setup flows, SSO, and enterprise integration in 2025

Copilot relies on Entra ID as its enterprise identity backbone.

Microsoft Copilot operates within the robust security framework of Microsoft Entra ID (formerly Azure Active Directory), which provides centralized identity management for organizations of any size. When integrating Copilot—whether in the form of Studio agents, plugins, or Microsoft 365 extensions—developers are connecting to a security model that is already familiar to IT departments and fully compatible with enterprise compliance requirements. Entra ID underpins authentication for all user and app access, guaranteeing that only authorized individuals or applications interact with protected resources.

This identity backbone is essential for organizations managing sensitive data, as it enforces access boundaries and enables real-time visibility into authentication events across the tenant. Every sign-in, token issuance, and delegated API call is auditable, which greatly simplifies regulatory compliance and incident response. By tying Copilot’s capabilities directly to Entra ID, Microsoft ensures seamless integration with existing single sign-on (SSO) experiences, conditional access policies, and multi-factor authentication requirements.

For professionals building or maintaining Copilot integrations, understanding how Entra ID processes authentication requests is key. It allows teams to design workflows that minimize security risks while still delivering a streamlined user experience. Integration with Entra ID also unlocks advanced features such as just-in-time access reviews, identity protection, and risk-based conditional controls, which are increasingly expected in high-trust environments.

Three main flows cover most Copilot authentication scenarios.

Copilot implementations rely on well-established identity protocols to protect both user and backend resources. There are three core authentication flows that cover nearly all enterprise Copilot scenarios, each offering a different balance of security, user convenience, and operational control.

The OAuth 2.0 Authorization Code flow with PKCE is the gold standard for interactive user authentication. In this setup, the user initiates a secure sign-in process that includes the exchange of an authorization code for an access token. PKCE, or Proof Key for Code Exchange, further strengthens the flow by introducing a one-time code challenge and verifier, preventing interception or token substitution attacks during transmission. This is particularly valuable in web and mobile environments, where user sessions may traverse insecure networks.

Single Sign-On (SSO) via Entra ID allows users to interact with Copilot capabilities without ever entering their credentials again. Once the user is authenticated in a Microsoft 365 app or Teams, their session is reused by any embedded Copilot agent or plugin. This method significantly reduces friction, increases adoption rates, and makes it possible to deploy Copilot at scale without overwhelming users with consent prompts. SSO is also the foundation for seamless cross-app workflows and deep integration into the Microsoft ecosystem.

The On-Behalf-Of (OBO) flow and Client Credentials grant are critical for scenarios where Copilot agents or plugins must act autonomously or call downstream APIs on behalf of a user. OBO enables token exchange so a middle-tier API can invoke another API (such as Microsoft Graph) while preserving the user’s identity and access rights. Client Credentials, on the other hand, are reserved for pure automation and background processes—allowing an application, but not an individual user, to access resources. This supports scenarios such as batch processing, scheduled reports, or administrative automation tasks.

Copilot Studio agent authentication integrates directly with Entra ID.

Developers building agents in Copilot Studio can take full advantage of Entra ID’s authentication system by enabling manual sign-in requirements for any agent or action that touches sensitive data. The configuration process starts with registering an application in the Entra admin center, where developers define the authentication type, redirect URIs, supported account types, and required API scopes. These scopes determine which operations the agent can perform on behalf of the signed-in user.

After registration, Copilot Studio connects to the Entra app registration and manages token acquisition for each user session. When a user triggers an action that requires authentication, Copilot Studio will prompt them to sign in and grant consent. The token is then held in memory for the duration of the session and discarded upon expiry. This ensures that Copilot Studio never stores long-term credentials or refresh tokens, reducing the risk of credential compromise.

A practical consideration for teams is to anticipate token expiration events. Since tokens are ephemeral and not persisted by Copilot Studio, any long-running workflow or background action must be built to gracefully handle re-authentication. This may involve implementing retry logic, providing clear error messages to end users, or queuing actions for later execution after the user reauthenticates. These patterns help maintain a smooth user experience even as security policies enforce strict token lifetimes.

Additionally, developers should be aware that Entra ID supports integration with external identity providers and custom domains, which can further align Copilot authentication with an organization’s federated identity strategy.

SSO with Entra enables seamless identity reuse in embedded scenarios.

Single Sign-On (SSO) with Entra ID is the preferred method for enabling frictionless access to Copilot features within embedded environments such as Teams, Outlook, or other Microsoft 365 applications. By leveraging SSO, developers can ensure that users who are already authenticated in the host app do not encounter redundant sign-in prompts when invoking Copilot agents or extensions.

To enable SSO, developers must first configure the app registration in Entra ID to support delegated permissions for the necessary resources, such as Microsoft Graph or custom APIs. They also need to specify redirect URIs that match the embedding environment, ensuring the token is properly returned and consumed by Copilot Studio or the plugin. The configuration is completed by wiring the authentication connection in Copilot Studio to the appropriate Entra app.

A major advantage of this approach is its alignment with organizational security policies, including conditional access, device compliance, and multi-factor authentication. SSO also supports seamless user experiences in environments with frequent context switching, such as frontline workforces or users who rely on multiple Microsoft 365 applications throughout the day.

Developers should note that SSO implementations must handle session management and consent flows efficiently. This may include handling token renewal, managing scope changes, and providing granular error feedback to users in case of consent or policy issues.

Microsoft 365 Copilot plugin authentication supports four schemes.

Microsoft 365 Copilot plugins offer flexibility by supporting four distinct authentication schemes, allowing developers to balance security, complexity, and end-user convenience based on their integration needs.

1. OAuth 2.0 with PKCE: This is the preferred method for user-delegated access, offering the highest security and granular scope control. It’s suitable for scenarios where the plugin needs to perform actions on behalf of individual users, such as reading emails, sending messages, or updating calendar events. The authorization code and PKCE challenge provide robust protection against interception and replay attacks.

2. Microsoft Entra ID SSO: Ideal for plugins embedded within Microsoft 365 apps, SSO allows plugins to reuse existing authentication sessions. This eliminates repetitive consent prompts and streamlines the user journey, particularly in environments with strict security policies and high user turnover.

3. API Key: Useful for plugins accessing public or low-sensitivity endpoints, API keys offer quick setup but lack per-user identity. While they simplify initial development, they are not recommended for high-value or sensitive operations due to limited security controls and difficulty enforcing granular permissions.

4. No Auth: Reserved for plugins that only consume public content, this method offers the simplest configuration and lowest friction. However, it cannot be used to access protected resources or perform actions that require user identity.

Selecting the appropriate authentication scheme depends on the plugin’s intended functionality, the sensitivity of accessed data, and compliance obligations within the organization. Developers should default to OAuth 2.0 with PKCE or SSO for any plugin interacting with private data or organizational APIs.

It is also recommended to periodically review authentication schemes in production, adapting to changing compliance requirements or user expectations.

Teams plugins and message extensions require proper OAuth configuration.

For Teams plugins and message extensions, authentication must be managed through the Teams Developer Portal. This ensures that user identity is correctly propagated and that all API calls adhere to organizational security standards.

To configure OAuth, developers must:

• Register the app and define OAuth connections in the Teams Developer Portal.

• Link the Teams app to an existing Entra ID app registration, specifying required scopes and redirect URIs.

• Handle user consent and token refresh within the plugin, ensuring that authentication flows are robust against network interruptions and session expirations.

Teams plugins often require multi-tenant support, meaning developers must design authentication patterns that work across organizational boundaries. This can include configuring consent frameworks for external users or guest accounts and providing fallback authentication methods in hybrid deployments.

Properly configured OAuth also enables advanced scenarios such as delegated access to Microsoft Graph, user profile enrichment, and context-aware actions that adapt to the current user’s role or permissions.

Access control and Graph API scopes must follow least-privilege logic.

Effective Copilot integrations rely on strict access control practices, enforced via Entra ID’s granular permission model. When requesting access to Microsoft Graph or other APIs, developers must choose between delegated and application permissions.

• Delegated permissions allow the plugin or agent to perform actions on behalf of the signed-in user, constrained by the user’s own access rights. This is the recommended approach for most interactive workflows, as it ensures user accountability and minimizes risk.

• Application permissions grant the plugin or backend app the ability to act independently of any user, suitable for automation, reporting, or background processing. Because these permissions can grant wide-ranging access, it is critical to request only what is strictly necessary and to use admin consent sparingly.

Entra ID supports advanced scope management, including admin consent workflows, permission reviews, and revocation policies. Security-conscious organizations can leverage these features to continuously audit and adjust access patterns, reducing the attack surface and complying with the principle of least privilege.

It is also important to monitor scope changes and regularly audit app registrations to detect privilege creep or misconfiguration.

How to propagate tokens across layers securely.

Token propagation is fundamental in distributed Copilot architectures, especially when multiple layers—such as plugins, middle-tier APIs, and backend services—need to participate in a user’s session.

The On-Behalf-Of (OBO) flow enables one service to exchange a user’s token for another, obtaining a new access token to call downstream APIs while maintaining the original user’s permissions. This is particularly useful for scenarios where Copilot must chain requests through internal services or external connectors, as it maintains the audit trail and enforces consistent authorization throughout the call stack.

Implementing OBO requires careful integration with the Microsoft Authentication Library (MSAL), which manages token caching, refresh, and exchange. Developers should ensure that all tokens are transmitted securely, stored only in memory, and invalidated promptly after use. MSAL provides built-in mechanisms for error handling, retries, and silent token renewal, which help maintain session continuity.

In automation or background workflows, the Client Credentials grant can be used, but should be reserved for non-user, service-to-service communications. Here, the application acts entirely on its own identity, and permissions should be tightly restricted and monitored.

Security best practices include limiting token lifetimes, rotating credentials, and monitoring token usage for anomalous patterns.

Authentication flow cheat-sheet.

Scenario	Flow	Where to Configure	Notes
Copilot Studio agent with user sign-in	OAuth 2.0 + PKCE	Copilot Studio + Entra App Registration	Secure user-delegated Graph/API access
Embedded agent in Teams	SSO	Copilot Studio + Entra App Registration	Best UX, seamless with host app identity
Plugin backend calling Graph	OBO	Backend API + MSAL	Maintains user context through call chain
Background automation	Client Credentials	Backend + Entra App Registration	App-only access, strictly limit permissions

Each configuration should be mapped to the intended business process and user journey, ensuring that authentication supports both security and usability at scale.

Security principles for Copilot authentication.

Strong security practices are vital for any enterprise-grade Copilot deployment. These principles ensure ongoing protection of user data, compliance with organizational policies, and resilience against emerging threats.

• Enforce least privilege by always requesting the minimum necessary scopes and permissions. Review permissions regularly and remove unused access promptly.

• Restrict admin consent to trusted apps, ensuring that only authorized applications can obtain broad or sensitive permissions.

• Implement PKCE for all OAuth-based user flows to mitigate authorization code interception attacks.

• Leverage SSO to reduce user friction and standardize authentication experiences across apps.

• Rotate secrets and use certificates for service principals, preferring automated rotation policies where possible.

• Monitor authentication events and token usage, using Entra ID’s built-in logging and alerting to detect and respond to suspicious activity.

Proactive security review, combined with continuous monitoring and periodic penetration testing, creates a strong foundation for Copilot’s role in enterprise automation and productivity.

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