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Scenario/Problem: We need to facilitate access (user access) to an Windows 2016 VM server for couple of our colleagues in our organization.

My understanding is that we do not need to create users locally on the VM. The VM will join organization's active directory domain and users will be authenticated in organization active directory server when they want access to the VM. If it works in this manner, then I am having trouble understanding how active directory server will know these particular users have access to the VM? Or how VM will inform active directory that these users are allowed.

Sorry guys, I am new to Windows world. My basic understanding might be wrong. Please enlighten me!!

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You are correct: when machines are member of an AD domain there is no need to create local accounts. User accounts 'live' in the domain and can be used to access machines that are member of the domain

In what way are your users supposed to use the server VM mentioned? Will they access file shares? Do they need to logon in a RDP session? Depending on what users need to be enabled for certain permissions have to be granted.

If they need access to file shares the accounts need to be granted access to the share and file system. If they have to be able to logon to a RDP session they will need to become member of the local group 'Remote Desktop Users' on the server.

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