Send & Receive Issues

How to Fix Microsoft 365 Email Forwarding Stopped Working for Unlicensed Users

Rana Garcia Oct 20, 2026 869 views

Question details

Users or administrators report that automated email forwarding configured for an unlicensed Microsoft 365 account has suddenly stopped working, resulting in delivery failures.

How to Fix Microsoft 365 Email Forwarding for Unlicensed Users When It Stops Working

Product: Microsoft 365 (Exchange Online)
Device & OS: not provided
Scenario: An administrator has set up email forwarding for an account without an active Microsoft 365 license, but incoming emails are no longer being redirected to the external or target destination.
Observed behavior: Forwarded emails fail to arrive at the destination address. Administrators or senders may receive a Non-Delivery Report (NDR) indicating that the mailbox does not exist or that automatic forwarding is blocked.

Before you start

Ensure you have Microsoft 365 Global Administrator or Exchange Administrator privileges before proceeding, as you will need access to the Exchange admin center and Microsoft 365 Defender portal.

Solution 1Recommended

Verify Account Configuration and Outbound Spam Policies

Check if Exchange Online has blocked automatic forwarding through security policies or if the forwarding destination address is invalid.

Microsoft 365 often disables automatic external forwarding by default to prevent data exfiltration and spam. Even if configured properly, outbound spam policies might be blocking the action.

Check Outbound Spam Policies

Log into the Microsoft 365 Defender portal. Navigate to Email & Collaboration > Policies & Rules > Threat policies > Anti-spam. Edit the 'Anti-spam outbound policy' and ensure that 'Automatic forwarding rules' is set to On or System-controlled.

Verify User Forwarding Settings

Open the Exchange Admin Center and go to Recipients > Mailboxes. Select the affected user, click on the 'Mailbox' tab, and select 'Manage email forwarding' to ensure the correct destination address is entered.

Review Non-Delivery Reports (NDR)

Run a Message Trace in the Exchange Admin Center for the affected email address to review the exact error code and identify whether the delivery failed due to a missing mailbox or a policy block.

Contact Microsoft Support: If policies are configured correctly but the issue persists, submit a service request in the Microsoft 365 admin center under Support > New service request.

Solution 2

Assign a License or Use a Shared Mailbox

An unlicensed user generally cannot maintain an active mailbox. You must use alternative administrative objects to route or store emails.

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Frequently Asked Questions

Why does an unlicensed Microsoft 365 user lose email forwarding capabilities?

Unlicensed users do not have an active Exchange Online mailbox. While temporary forwarding might work during a short 30-day grace period after license removal, Microsoft eventually deletes the mailbox, breaking any attached forwarding rules.

Can a shared mailbox forward emails without a license?

Yes, shared mailboxes in Microsoft 365 do not require a separate paid license to receive and forward emails (up to 50GB). This makes them a cost-effective solution for generic addresses like info@ or sales@ that just need to redirect mail.

How do I fix the '550 5.7.520 Access denied' error when forwarding emails?

This specific NDR error usually means automatic forwarding is disabled by your organization's security settings. An administrator must update the Outbound Anti-spam policy in the Microsoft 365 Defender portal to allow automatic external forwarding.

What is the best way to route emails to an external address without consuming a Microsoft 365 license?

The best practice is to create a 'Mail Contact' in the Exchange Admin Center containing the external email address. You can then set up a mail flow rule (Transport rule) to redirect incoming messages directly to that contact.

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