For a while and increasingly we have been having strange login issues with Outlook 2016 connecting to our Office 365 Exchange Online. It usually happens to a single user for 1-24 hours then it corrects itself. The user is constantly prompted for password with a prompt that looks like a windows one rather than Outlook. We are AD->AAD synched so the user logs into machine with same username and password with automatic passthrough authentication. Other programs like Skype for Business or OneDrive don’t have issues and the user can login to https://outlook.office365.com/owa/ fine. It simply seems to be a transient issue with Outlook 2016 authentication. Has anyone seen anything similar?
That's probably a request to some on-premises resource. Are you in Hybrid? Are the users accessing any shared calendars, or maybe syncing SharePoint lists, etc? What happens if you cancel the prompt - does Outlook stay connected? Generally speaking, the easier way to get an answer to this is to run a Fiddler trace once the prompts start appearing.
We are Hybrid for AD-AAD but not for Exchange. The people who have problems don't have any shared calendars or lists other than Office 365 groups. They are rarely accessing the groups. If they cancel the prompt outlook won't connect. If they try to input password it goes away and doesn't connect and then pops up again almost instantly.
Sometimes if they reboot computer it fixes it, but often not. It simply seems to be wait the problem out and it goes away.