Quick Answer
The answer is to enable password hash synchronization in Microsoft Entra Connect, which is the correct choice because this setting is the core mechanism that allows on-premises Active Directory password hashes to be securely synchronized to Microsoft Entra ID for hybrid identity authentication. Without this specific toggle enabled during Entra Connect configuration, password hash synchronization simply will not function, regardless of other directory sync settings. On the Microsoft 365 Administrator MS-102 exam, this question tests your understanding that password hash synchronization is a feature within the Entra Connect tool, not a separate service—a common trap is confusing it with pass-through authentication or federation, which are different hybrid identity methods. Remember that password hash sync is the simplest and most resilient option for hybrid identity, as it provides automatic failover if on-premises servers are unavailable. A helpful memory tip is PHS = Passwords Hash Sync, and think of it as the “set and forget” setting within the Synchronization Service.
This MS-102 practice question tests your understanding of deploy and manage a microsoft 365 tenant. This is a configuration task: choose the command set that satisfies every stated requirement. Small differences — like 'secret' vs 'password' or 'transport input ssh' vs 'all' — change whether the answer is correct. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
Which THREE settings must be configured to set up a hybrid identity deployment using password hash synchronization?
Install and configure Microsoft Entra Connect.
Entra Connect synchronizes directories.
Configure Seamless Single Sign-On (SSO).
SSO provides seamless access.
Enable password hash synchronization in Entra Connect.
This syncs password hashes.
Deploy Active Directory Federation Services (AD FS).
Why wrong: AD FS is not needed for PHS.
Configure Pass-Through Authentication.
Why wrong: Pass-through is an alternative to PHS.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Install and configure Microsoft Entra Connect.
Option A is correct because Microsoft Entra Connect (formerly Azure AD Connect) is the essential tool that bridges on-premises Active Directory with Microsoft Entra ID. It must be installed and configured to enable directory synchronization, which is the foundation for any hybrid identity deployment, including password hash synchronization.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Install and configure Microsoft Entra Connect.
Why this is correct
Entra Connect synchronizes directories.
Related concept
Read the scenario before looking for a memorised answer.
Configure Seamless Single Sign-On (SSO).
Why this is correct
SSO provides seamless access.
Related concept
Read the scenario before looking for a memorised answer.
Enable password hash synchronization in Entra Connect.
Why this is correct
This syncs password hashes.
Related concept
Read the scenario before looking for a memorised answer.
Deploy Active Directory Federation Services (AD FS).
Why it's wrong here
AD FS is not needed for PHS.
Configure Pass-Through Authentication.
Why it's wrong here
Pass-through is an alternative to PHS.
Common exam traps
The trap here is that candidates often confuse password hash synchronization with Pass-Through Authentication or AD FS, thinking all three are required for hybrid identity, when in fact password hash sync is a standalone method that only needs Entra Connect and the sync feature enabled.
Detailed technical explanation
Password hash synchronization works by hashing the on-premises AD user password (using MD4, then SHA-256, and salting it) and syncing that hash to Microsoft Entra ID every 2 minutes via the Synchronization Service. This allows users to authenticate with the same password in the cloud without any on-premises infrastructure beyond Entra Connect, making it the simplest hybrid identity option. A subtle behavior is that password hash sync does not require Seamless SSO to function, but Seamless SSO (Option B) can be enabled alongside it to provide automatic sign-in on domain-joined devices without prompting for credentials.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.
What to study next
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FAQ
Deploy and manage a Microsoft 365 tenant — This question tests Deploy and manage a Microsoft 365 tenant — Read the scenario before looking for a memorised answer..
The correct answer is: Install and configure Microsoft Entra Connect. — Option A is correct because Microsoft Entra Connect (formerly Azure AD Connect) is the essential tool that bridges on-premises Active Directory with Microsoft Entra ID. It must be installed and configured to enable directory synchronization, which is the foundation for any hybrid identity deployment, including password hash synchronization.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
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