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On my Windows 2008 R2 server with IIS 7.5 I would like to have my ASP.NET website running with forms authentication, while protecting a subfolder with the basic Windows authentication. I have done this on Windows 2003 with IIS 6 for years, but I simply can't get it to work with IIS 7.5. Your input would be highly appreciated :)

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You can change the Application Pool to run in Classic Mode rather than Integrated Mode and it should work. See: http://www.iis.net/ConfigReference/system.applicationHost/applicationPools/add

The reason is because in integrated mode IIS authentication happens along with ASP.NET, but in your case you need both to be decoupled, Classic Mode will let you.

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