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I'm not sure this can be done but how can I restrict a user to send to specific internal email addresses? I am running exchange server 2003.

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Preventing users from sending email to Internet addresses in Exchange 2003 amounts to placing either users or groups into the "Reject messages from" list on the SMTP connector you use to deliver email to the Internet. (Not using an SMTP Connector? You should be, and you really can't effectively do this w/o one anyway.)

Be aware that if you choose to restrict sending Internet email by group that you'll need to modify the registry on the Exchange Server computer as described in this KB article to allow group restrictions to be processed.

I doubt that you're interested in just restricting the users' ability to send email. Assumign you want to also restrict their ability to receive Internet email you can may either tick the "From authenticated users only" check box on each user's "Delivery Restrictions" dialog in the "Exchange General" tab of their account properties, or assign all the users who shouldn't have Internet email addresses to a recipient policy that creates a non-Internet-routable email address as their primary SMTP address (@your-domain.internal, etc). The first method is easier if you only have a few accounts to change. This article from Microsoft, though dated, describes the second method in detail.

There's a decent tutorial about it with some screenshots. It's pretty straightforward to do (registry setting for group-based rejection of messages on SMTP connectors aside).

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