License & Subscription Issues

Microsoft 365 E5 Licensing for Entra ID and Group Policy

Huma Ashraf Ch Oct 20, 2026 868 views

Question details

The user needs to understand what identity management, Active Directory, and Group Policy features are included in Microsoft 365 E5 licensing.

Microsoft 365 E5 Licensing for Entra ID and Group Policy Explained

Product: Microsoft 365 E5
Device & OS: not provided
Scenario: Configuring cloud identity management, Microsoft Entra Domain Services, or hybrid on-premises environments.
Observed behavior: Determining whether traditional Active Directory domain features and Group Policy management are covered by standard Entra ID capabilities or require additional services.

Before you start

Ensure you have global administrator or billing administrator access to the Microsoft 365 admin center to verify your current licensing and feature availability.

Solution 1Recommended

Verify Included Entra ID Features in Microsoft 365 E5

Review your E5 subscription to understand the included cloud identity capabilities before purchasing any add-ons or provisioning hybrid servers.

Microsoft 365 E5 includes advanced Microsoft Entra ID (formerly Azure Active Directory) features out of the box, such as advanced identity and access management. However, it is important to distinguish between cloud-based Entra ID and traditional Active Directory Domain Services (AD DS).

Access the Microsoft 365 Admin Center

Navigate to the Microsoft 365 Admin Center and sign in with your global administrator credentials.

Review active licenses

Go to the Billing section, select Licenses, and confirm that your Microsoft 365 E5 subscription is active and assigned to your administrative users.

Explore Entra ID capabilities

Open the Microsoft Entra admin center. Here, you can manage cloud users, devices, and configure risk-based access policies that are natively included in the E5 license.

Verify Included Entra ID Features in Microsoft 365 E5

Cloud vs. Traditional Identity: Entra ID is an identity management service for cloud applications, whereas traditional Active Directory requires an on-premises Windows Server.

Solution 2

Configure Entra Domain Services for Group Policy

If traditional Group Policy Object (GPO) management is required in a cloud-only environment, you must deploy Microsoft Entra Domain Services, which may require separate licensing.

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Frequently Asked Questions

Does Microsoft 365 E5 include traditional Active Directory?

No, Microsoft 365 E5 includes Entra ID (formerly Azure AD) for cloud-based identity and access management. Traditional Active Directory requires an on-premises Windows Server infrastructure.

Do I need extra licenses to use Group Policy with Entra ID?

Yes, standard Entra ID does not support traditional Group Policy. To use Group Policy in the cloud, you need Microsoft Entra Domain Services, which may involve separate licensing or consumption charges depending on your organization's specific Microsoft agreement.

What are risk-based access policies in Microsoft 365 E5?

Risk-based access policies are part of Microsoft Entra ID Protection, which is included in E5. They automate responses to detected sign-in risks, serving as a modern, cloud-native security control when traditional Group Policy is not deployed.

How do I manage hybrid environments with E5 licensing?

A hybrid setup requires maintaining your on-premises Active Directory alongside the appropriate Windows Server licenses. You can then use Microsoft Entra Connect to sync your local AD with the Entra ID included in your Microsoft 365 E5 plan.

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